Forterra Trust (formerly: Treasury China Trust)

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#51
The Irish Times - Thursday, August 16, 2012

Call for inquiry into Treasury China Trust
CLIFFORD COONAN in Beijing

A MINORITY shareholder in Treasury China Trust (TCT) has written a letter to Singapore’s Business Times newspaper calling for an investigation by the Singapore stock exchange (SGX) into the way the property company is run.

Of particular concern to investor Mano Sabnani was his belief that shareholders of TCT’s trustee-manager, Treasury Holdings Real Estate Pte Ltd, have too much power in the company, and not the directors of TCT or its unit-holders.

TCT listed in Singapore in June 2010 and has substantial real estate holdings in China but has headquarters in Singapore.

“Recent developments at SGX-listed business trust TCT raise several questions which are as yet unanswered,” Mr Sabnani wrote to the newspaper.

Treasury Holdings directors Richard Barrett and Johnny Ronan hold a 30 per cent stake in TCT. Treasury Holdings itself holds no units in TCT, although it is allowed to request units in lieu of cash for management fees, opening the possibility of it holding units at some time in the future.

Mr Sabnani noted how Goldman Sachs had been appointed by the trustee-manager to advise on closing the gap between net asset value per unit and the trading price of the TCT units. While Goldman Sachs reported its findings to the board, nothing had been made public, he wrote.

Instead, the trustee-manager’s ultimate controlling shareholder, Mr Barrett, announced to the stock exchange that all the directors of the trustee-manager had stepped down on July 25th.

A day later, he reappointed himself, chief executive Richard David and two other directors, Mr Sabnani wrote.

“What did Goldman Sachs have to say about how the SGX-listed business trust is being run, with its high management fees and complete control exercised by the trustee-manager?” Mr Sabnani wrote.

“At present, the trustee-manager can only be removed or dismissed with a 75 per cent vote by unit-holders; Richard Barrett and John Ronan currently control about 30 per cent of the TCT units and they are allowed to vote on any resolution to remove the trustee-manager, which they own,” he said.

The letter also complained about how three independent directors, including Raymond Horney and Jen Shek Voon, were dropped and replaced by two others, including Hu Sitao, whom Mr Sabnani said the trustee-manager had decided to appoint as the lead independent director despite his past business relationships with the group.

“I believe proper corporate governance would require that the directors of the trustee-manager be appointed by the unit-holders, and dismissed by them, by a simple majority of votes cast,” he said.

In a response to the letter, the directors of the trustee-manager said they had noted Mr Sabnani’s concerns.

“First and foremost, the trustee-manager wishes to assure all unit-holders of TCT that in the discharge of its duties as the trustee-manager of TCT, it has always acted, and will continue to act, in the best interests of all unit-holders of TCT as a whole,” they said in a statement.

The Goldman Sachs report was presently under review, they said. The board had received letters from the former directors saying they disagreed with “certain information stated in the announcements released in connection with their vacation of office as directors of the trustee-manager”.

There had been no intention to keep this from unit-holders, it said.
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#52
Price is now at a 52 week low
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#53
what i find a little worrying is it doesnt show much profit after tax (in some quarters even losses) if we exclude the fair value gains in investment properties in its financial statement. otherwise, it may still make a cheap value play
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#54
(29-08-2012, 01:33 PM)money Wrote: what i find a little worrying is it doesnt show much profit after tax (in some quarters even losses) if we exclude the fair value gains in investment properties in its financial statement. otherwise, it may still make a cheap value play

Do you want to share your calculations here?

Im more interested in their Beijing Logistic Park actually. Its located near to GLP's Logistic facility in Bejing too.
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#55
Their recurring income hasn't been great -

1H 2012 (SGD)

Revenue: $52.41 mil
NPI: $32.96 mil

Trustee-Manager Fees: $8.37 mil
Administrative Expense: $5.14 mil
Net Interest Expense: $26.01 mil

This results in recurring loss of $6.56 million ! I guess value will come from the sale of its investment assets and distributions of sale proceeds to shareholders. Please correct me if my figures are incorrect.

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#56
(29-08-2012, 02:39 PM)Nick Wrote: Their recurring income hasn't been great -

1H 2012 (SGD)

Revenue: $52.41 mil
NPI: $32.96 mil

Trustee-Manager Fees: $8.37 mil
Administrative Expense: $5.14 mil
Net Interest Expense: $26.01 mil

This results in recurring loss of $6.56 million ! I guess value will come from the sale of its investment assets and distributions of sale proceeds to shareholders. Please correct me if my figures are incorrect.

(Not Vested)

You are right, Im sure the value will come once Beijing Logistic park is divested off! That is actually a choice property. Should attract many potential suitors including GLP themselves.
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#57
[/quote]

You are right, Im sure the value will come once Beijing Logistic park is divested off! That is actually a choice property. Should attract many potential suitors including GLP themselves.
[/quote]

I do not agree with the above. The BLP does not generate any revenue / profits, as I am sure you know. The sale will release cash but it will only generate excess of cash of S$94mn to the company (assets for sales minus liabilities to be divested). This is a small dent in their $1.1bn in debt

I think there are two major and worrisome issues here:
* TCT on averages converts 27% of its sales into op cash flow. This is not a strong OCF conversion number. A great result under current conditions is S$10mn in OCF per quarter. With this level of OCF and OCF conversion ratio, TCT's debt load is massive. It can barely pay for its cash interest expense based on most recent results. Since Sept 2010, the company has only re-paid principal in 4 quarters (of 8), two of which were part of the 2010 balance sheet restructuring

* The lift from the Parkson rental has yet to emerge. It should happen over the next two quarters. if it doesn't or it comes in short, I think this leaves TCT equity as dead-in-the-water.

No way this counter can (or should) issue a dividend.

Matt
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#58
TCT has been halted.

Two highly interesting articles about the recent Management ownership transactions:

Sale of Treasury-linked companies to Jersey firm raises questions:

http://www.irishtimes.com/newspaper/fina...80627.html [Article]

Barrett has 'nothing to hide' over purchase of Treasury subsidiaries

http://www.irishtimes.com/newspaper/fina...80406.html [Article]

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#59
The share price of TCT closed at SGD1.03 per share yesterday, a steep discount of 77% to its NAV of SGD4.49 per share. Inspite of the fact that litigations are on going between Treasury Holdings ( the "former parent company" of TCT's Trustee Manager) and Nama/KBC, this stock definitely warrant a closer look.
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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#60
Nav per share may not mean very much if a company has problems funding it's debt obligations and opts for dilutive new share issuance as the solution. I'm not saying this is or will be the case for tct. But one should be aware of this possibility.
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