LTC Corp (prev. Lion Teck Chiang)

[TTTI]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

Hi TTI,

To be fair, they still have $12k of borrowings outstanding. Are you aware of Ltc's recent 40% acqusition of regata? The market value of the project is 125mil ringgit and they paid ard 26mil ringgit for 40%? Seems too good to be true. If gem residence(penang) is completely sold, Ltc will net ard 8-9mil sgd of profit, doubling their roi? I am not sure if debt is involved as the announcement  wasnt detailed enough.

Will be great to have your views on this.

Regards

Yup.
26mil ringgit is only for 40%, so if we extrapolate it, they're paying a price that's a 48% discount to the assessed market value of the project.
That does sound cheap, so there's a safety buffer there.
But we gotta take into account that they have to provide shareholder's loans to Regata $2.7mil, and that's likely to be interest free.
On top of that, the investment is in ringgit, and so LTC is exposed to forex risks. SGD-MYR has been strengthening for a loooong time. Many many years.
So if the trend continues, its a headwind.

The project is not completed too, so it's not like they're buying a completed project, and we can just use the latest assessed value to determine the merits of the deal.
There are still execution risks.
And even upon completion, we don't know how the sales will be like yet
It's a mixed development, and Penang does give me more comfort compared to other states.
But I think the cheap price they got it at, reflects the execution risks they have to bear. 

It's for this reason that I said I don't think we can expect a higher dividend. LTC corp is not known to give higher dividends, they've stuck to their guns for several years (I think in 1 recent year, Mr Mano queried and there was a big hoo ha about it as he stormed out of the AGM)

The markets probably also think it's a great deal, as evidenced by the rising share price since the deal was announced (I think it was back in April right? can't rem exactly)
PS. $12K of total debt outstanding is nothing la, can round down. LOL

[TTTI]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

Hi TTI,

To be fair, they still have $12k of borrowings outstanding. Are you aware of Ltc's recent 40% acqusition of regata? The market value of the project is 125mil ringgit and they paid ard 26mil ringgit for 40%? Seems too good to be true. If gem residence(penang) is completely sold, Ltc will net ard 8-9mil sgd of profit, doubling their roi? I am not sure if debt is involved as the announcement  wasnt detailed enough.

Will be great to have your views on this.

Regards

Yup.
26mil ringgit is only for 40%, so if we extrapolate it, they're paying a price that's a 48% discount to the assessed market value of the project.
That does sound cheap, so there's a safety buffer there.
But we gotta take into account that they have to provide shareholder's loans to Regata $2.7mil, and that's likely to be interest free.
On top of that, the investment is in ringgit, and so LTC is exposed to forex risks. SGD-MYR has been strengthening for a loooong time. Many many years.
So if the trend continues, its a headwind.

The project is not completed too, so it's not like they're buying a completed project, and we can just use the latest assessed value to determine the merits of the deal.
There are still execution risks.
And even upon completion, we don't know how the sales will be like yet
It's a mixed development, and Penang does give me more comfort compared to other states.
But I think the cheap price they got it at, reflects the execution risks they have to bear. 

It's for this reason that I said I don't think we can expect a higher dividend. LTC corp is not known to give higher dividends, they've stuck to their guns for several years (I think in 1 recent year, Mr Mano queried and there was a big hoo ha about it as he stormed out of the AGM)

The markets probably also think it's a great deal, as evidenced by the rising share price since the deal was announced (I think it was back in April right? can't rem exactly)
PS. $12K of total debt outstanding is nothing la, can round down. LOL

Oh and btw, just to point out:
LTC themselves are trading at > a 48% discount to their assessed NAV. 
So if you think the 48% discount Regata deal is cheap, logically..... LTC itself is much cheaper.
So you get a discount on the discounted deal.
LOL

[BlueKelah]

Which one would have to ask why is it discounted so much, and most of all is the co. Transparent enough and opmi friendly?

Do u think boss would press down share price and delist on the cheap in the future?

Sent from Moto G5+ using Tapatalk

[Scg8866t]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

Hi TTI,

To be fair, they still have $12k of borrowings outstanding. Are you aware of Ltc's recent 40% acqusition of regata? The market value of the project is 125mil ringgit and they paid ard 26mil ringgit for 40%? Seems too good to be true. If gem residence(penang) is completely sold, Ltc will net ard 8-9mil sgd of profit, doubling their roi? I am not sure if debt is involved as the announcement  wasnt detailed enough.

Will be great to have your views on this.

Regards

Yup.
26mil ringgit is only for 40%, so if we extrapolate it, they're paying a price that's a 48% discount to the assessed market value of the project.
That does sound cheap, so there's a safety buffer there.
But we gotta take into account that they have to provide shareholder's loans to Regata $2.7mil, and that's likely to be interest free.
On top of that, the investment is in ringgit, and so LTC is exposed to forex risks. SGD-MYR has been strengthening for a loooong time. Many many years.
So if the trend continues, its a headwind.

The project is not completed too, so it's not like they're buying a completed project, and we can just use the latest assessed value to determine the merits of the deal.
There are still execution risks.
And even upon completion, we don't know how the sales will be like yet
It's a mixed development, and Penang does give me more comfort compared to other states.
But I think the cheap price they got it at, reflects the execution risks they have to bear. 

It's for this reason that I said I don't think we can expect a higher dividend. LTC corp is not known to give higher dividends, they've stuck to their guns for several years (I think in 1 recent year, Mr Mano queried and there was a big hoo ha about it as he stormed out of the AGM)

The markets probably also think it's a great deal, as evidenced by the rising share price since the deal was announced (I think it was back in April right? can't rem exactly)
PS. $12K of total debt outstanding is nothing la, can round down. LOL

Oh and btw, just to point out:
LTC themselves are trading at > a 48% discount to their assessed NAV. 
So if you think the 48% discount Regata deal is cheap, logically..... LTC itself is much cheaper.
So you get a discount on the discounted deal.
LOL

Thanks, today inching up to 0.68, amazing.

A simple sales and lease back for their arumugam is already 75cts per share. If they were to do that, the cash and businesses they have will be free with extra cash from arumugam too. If they are not achieving reasonable returns from their property rental, they might as well sell. Arumugam buildings are near the mrt but not renovated to modern standard. Own view.

[TTTI]

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

Hi TTI,

To be fair, they still have $12k of borrowings outstanding. Are you aware of Ltc's recent 40% acqusition of regata? The market value of the project is 125mil ringgit and they paid ard 26mil ringgit for 40%? Seems too good to be true. If gem residence(penang) is completely sold, Ltc will net ard 8-9mil sgd of profit, doubling their roi? I am not sure if debt is involved as the announcement  wasnt detailed enough.

Will be great to have your views on this.

Regards

Yup.
26mil ringgit is only for 40%, so if we extrapolate it, they're paying a price that's a 48% discount to the assessed market value of the project.
That does sound cheap, so there's a safety buffer there.
But we gotta take into account that they have to provide shareholder's loans to Regata $2.7mil, and that's likely to be interest free.
On top of that, the investment is in ringgit, and so LTC is exposed to forex risks. SGD-MYR has been strengthening for a loooong time. Many many years.
So if the trend continues, its a headwind.

The project is not completed too, so it's not like they're buying a completed project, and we can just use the latest assessed value to determine the merits of the deal.
There are still execution risks.
And even upon completion, we don't know how the sales will be like yet
It's a mixed development, and Penang does give me more comfort compared to other states.
But I think the cheap price they got it at, reflects the execution risks they have to bear. 

It's for this reason that I said I don't think we can expect a higher dividend. LTC corp is not known to give higher dividends, they've stuck to their guns for several years (I think in 1 recent year, Mr Mano queried and there was a big hoo ha about it as he stormed out of the AGM)

The markets probably also think it's a great deal, as evidenced by the rising share price since the deal was announced (I think it was back in April right? can't rem exactly)
PS. $12K of total debt outstanding is nothing la, can round down. LOL

Oh and btw, just to point out:
LTC themselves are trading at > a 48% discount to their assessed NAV. 
So if you think the 48% discount Regata deal is cheap, logically..... LTC itself is much cheaper.
So you get a discount on the discounted deal.
LOL

Thanks, today inching up to 0.68, amazing.

A simple sales and lease back for their arumugam is already 75cts per share. If they were to do that, the cash and businesses they have will be free with extra cash from arumugam too. If they are not achieving reasonable returns from their property rental, they might as well sell. Arumugam buildings are near the mrt but not renovated to modern standard. Own view.

yea, exactly.
I've been talking about that for ages though:
https://thumbtackinvestor.wordpress.com/...s-ar-2016/

If this was US, we'd have an activist fund come in to shake things up long ago.
2 yrs ago, they could've easily done a sale and leaseback when prices were high. 
Freehold and just beside the MRT. 
The cash from the sale would already cover the share price.
The board has forgotten that their fudiciary duty is to maximize shareholder returns.
Not sit pretty around round tables and collect fees year in year out, while padding the place for their kids to come in and do the same.

The business generates so much FCF, yet the use of the FCF leaves much to be desired. Which is a real pity.

The share price is rising.. it HAS to rise. It is so far behind the net assets that it's starting to look ridiculous.

[mslee888]

Full Yr results out.

http://infopub.sgx.com/FileOpen/LTC_Full...eID=468475

1ct dividend declared again...same as previous years despite FY profit up more than 100%.

[TTTI]

Full Yr results out.

http://infopub.sgx.com/FileOpen/LTC_Full...eID=468475

1ct dividend declared again...same as previous years despite FY profit up more than 100%.

When it comes to dividend, looking at profitability is not that useful, because it is backward looking. You want to know whether the company can support giving out the dividends vs their future obligations/plans for cash.
Looking at the current cash holdings, and their projected future liabilities would be more accurate, as it tells us how able is the company to support an increased dividend.

Having said that, as of FY17, the company holds approximately $48mil of cash and cash equivalents, including fixed deposits.
Previous years track record of cash holdings:
FY16: $34mil
FY15: $44mil
FY14: $39mil
FY13: $28mil

In fact, the cash holdings is at an all time high, and I analyzed going back as far as FY09
On top of that, this all time high cash holdings is at a time when the debt is now zero. ($6k technically)
And there is, as far as I know right now, no use for this excess cash.
The excess cash holdings is a drag on returns.

Which is why, the company's book value is now approaching $1.63, but it trades at around $0.63 (though I believe it'd rise with the release of the latest financials)
Correspondingly, the PE ratio is in the low teens.

So the share price is at a fraction of the NAV of the company, which hints at a low PE, yet the PE is in the low teens, which is not high but not exactly low for a steel middleman.
The reason is because the NAV includes a big chunk of cash which generates next to nothing in terms of returns.


It is a real pity, because as I've mentioned several times before, the company is incredibly cash flow generative.
In a single year, the CF has eliminated debt completely.
Each quarter, the FCF piles up, yet the management has been totally catabolic, destroying value with their every move.

I've railed at their acquisition of Sogo previously.
Right now, it turns out I'm completely right.
We have had 2 years of data, and the ridiculously expensive acquisition has generated:
$506k of profit in FY16
$1.13mil of LOSSES in FY17.

With a better management in place, LTC would've soared.
I am normally not critical of companies who do not give out dividends. If they can utilize the money, by all means keep it and compound it for me. As a shareholder, it belongs to me, whether it's in my bank account or it's in my share of the company's bank account.

But for LTC, I'd agree that they need to give out more dividends, if anything, to protect against the management from doing what they have been doing best: doing all sort of dumb things with it.

[mslee888]

I concur with TTTI view. If mgmt is doing a poor job in capital allocation,  they shd just increase dividend payout and let investors do their own capital allocation. We all know LTC is undervalue now but there is nothing much we can do about it except selling the shares away. Mgmt is just being contented with status quo, presumably thinking market will suddenly realise LTC true value one day in the future.

[CY09]

There is a similarity between ltc and sing holdings.

I do not follow ltc closely. One way to observe is to see the amount of remeueration received by directors who are part of the Cheng family. If it significantly more than the dividends distributed to shareholder; it is pherhaps an indication that the family is using ltc as a money making vehicle to feed their own wealth at the expense of opmi.

[TTTI]

LTC for the Chengs , HongFok for the Chongs , St****** for the Ows . Public monies for their families to enjoy and do what they like .

The remuneration for the top guy, Cheng Yong Liang, is actually not that high
It's given as within the $500k - $750k bracket, which I feel is reasonable for a mid cap company.

I suspect LTC benefits the Chengs in other ways via their numerous dealings with subsidiaries of other companies, not so much as a direct high remuneration type of benefit.
Or perhaps I'm wrong and the Chengs just simply genuinely tried their best, yet constantly found a way to destroy the FCF built up each quarter.

I'd also include Kingboard Copper Foil in to this list.
Listed company, but minorities are being taken for a ride as the company is severely undervalued from a balance sheet point of view, yet PE is crazily high as the management decimates the company's earning to benefit the parent company.