$KSH(ER0.SI) 2019 AGM Highlights

Investors of KSH and their JV partners would be happy to know that the KSH Executive Chairman Choo Chee Onn confirmed the official launch date of Oct 2019 for the massive 5.3 million sqm Gaobeidian Project at the company’s AGM last Friday. The project launch had been delayed a couple of times, first due to Beijing’s cooling measures which requires the homes construction to be 30% completed before sales can start and delayed again last October due to “the uncertainties caused by the trade war”. Mr Choo, who just came back from China revealed that the main reason for the delay was the additional cooling measures which restricted the sales to local residents only which means that those from Beijing cannot buy. The local government has eased these restrictions and now non-locals will have to pay social security for 3 years to be eligible to purchase in Gaobeidian.
Even with this condition, the JV company is confident enough to launch the first 100,000 sqm, about 820 units at a price of RMB 8,000 per sqm. They will quickly release more units once 50% of the units are sold. Although the launch price is a far cry from the RMB 20,000 psqm in nearby Baoding after news of the Xiong’an SEZ was released, the Gross Margin is a respectable 50% as their cost is around RMB 4,000 psqm.
Another piece of interesting info that the Chairman revealed is that the long term plan for their 13 overseas hotel properties is to form a Reit. Looks like everyone is jumping into the Reit wagon. However it’s a long time coming as 6 of the properties are still under development and they still have to wait for the income to stabilise first. They will also be adding more hotels in the meantime.
Together with the good sales of their Singapore development projects, the prospects of KSH is looking very bright however there will be much pain before gain. Due to the new financial reporting standards; for residential developments all interest expenses will have to be expensed instead of being capitalised previously. This would massively impact the profitability of KSH and their JV partners as their projects are only at the start of construction but have taken huge loans to purchase the land, etc. I expect their profits to be impacted for the next one year at least. Not a problem if you are a long term investor. Vested 50k shares, please DYODD.

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