ozxinvest
Expiry:
Target Price
$1.8
(+129.30%)
NOW:

The Shanghai Bund and My Hotel Shopping Spree

The (Shanghai) Bund 上海灘 was a TVB drama in the 80s. The theme song was a hit in that era, I did a search and found the translation of the of the cantonese lyrics to english:

Rushing waves, flowing waves
Thousand miles of the torrential river flows ceaselessly forever
Washed away the worldly affairs
Torrential mixing of the tidal currents
is it happiness? is it sorrow?

Hard to differentiate between happiness and sorrow in the waves
Success losing
Hard to see in the waves
Love you, hate you
Asked you if you know

Like a giant river, once distributed will not be withdrawn
Passed by in many bays
Passed by many beaches
Still not yet to suppress these struggles
Both happiness and sorrow

Unable to differentiate between them
Still wishing to overcome these waves
My heart has enough of those rises and falls
Still wishing to overcome these waves
My heart has enough of those rises and falls

Wow, sounds or feels familiar? Can become a Trader's Song, maybe "The Trader's Bund".

Anyways, this post is not about The TV Bund but some stocks that I have recently purchased, no doubt. However, it is related to a westin hotel and office tower, The Bund Center, located in Shanghai Bund, a magnificent looking one as in the pic attached, the crown is just too hard to be missed, but not the quiet stock, BCI,which is listed in SGX, abandoned with abundant value.

BCI also owns a shopping mall in NingBo, Golden Center, besides The Bund Center.

Bund Center Investment, BCI, was a spun off from AFP (now Sinarmas Land) in 2010. They have only 2 assets as mentioned above, so asset value is pretty straight forward. The book value stated is 55.3c and the price is 78.5c, not cheap right? But the NAV is booked conservatively at cost of about 450M, in it's AR the revaluation was around 2B, the market cap is about 600M, so roughly, it is now trading at a deep discount of 70% against it's RNAV. Comparing to it's peer listed in SGX, it's doesn't seems right in it's current pricing. Of cos, if you just use some stock screener, you can't find this gem. Moreover, dividend yield is about 4%.

What really catches my eye is the public float of this illiquid stock, 84% of the shares is held by the major shareholder Flambo Bund and 5% is held by UOBKayhian, so I think effectively there is only 11% free float in the market. Total liabilities is only 43M and 80M in cash, this could be a great candidate for delisting too, if the major shareholder decides to put it's assets on sale and cash in.

RHB had an analyst report on BCI (link: http://research.sginvestors.io/2017/04/bun...) but given that it's an illquid stock, it is understandable that the market is keeping a blind eye on it and thus presents an opportunity for value investors to collect it's shares, for how long? Who knows?

Give it a 30% discount to RNAV, we get $1.80 in price.

The wind seems to be changing, hotel stocks are in the lime light now. I have also been busy nibbling Far East Orchard since the beginning of the year and more recently, Hotel Grand, which could be selling off one of it's hotel in orchard.

With these 3 hotel related stocks, I hope to ride on this rushing tidal wave for the remaining months of the year and wish for more happiness than sorrow. Always expect the unexpected in the stock market, it could be more dramatic than the Shanghai Bund, just need to watch patiently till the end of the show.

$Bund Center(BTE.SI)

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ozxinvest :

Trading wise, UOBKayhian seems to be the main CP on the selling side, and quite persistent in restraining the price below 80c, just my own observation.

ozxinvest :

Looking at q2 and half year results posted in August. Despite gross profit lower by 4.9%, gross margin increased by 0.9% to 54%. Revenue was affected by the retail complex (I suppose the golden center) with the moving out of new world departmental store, down 1M in 2H. Cash and equivalent increased to 79M from 60M due to net cash from operations. No interim dividend but last interim dividend of 3.1c was given out in Q3, so expecting about the same payout coming q3 in Nov as sustainable by cash.

zzxiaoboizz :

the correct action would be to divest in lieu of lowering profit yoy. however it seems to be caused by the ningbo centre instead of the bund hotel which has held steady.

AlpacaInvestments :

Hi, not much expertise in this field, but I’ve got two questions, thanks!

1) Is the RNAV much higher because of Shanghai’s sky high property prices, if so, what happens in the event of a property downturn?

2) If the properties are leasehold, how long more are the leases?

haydenhuang :

Do note Sinarmas is the major shareholder of bund centre, they are well known to be self centric. The clock is ticking, their shanghai hotel lease is very short, should see a more drastic valuation decay yearly.

ozxinvest :

Reply to @haydenhuang : I am not sure how self centric the Widjaja family ( Oei Hong Leong is one of them) will affect the share price, they do pay good dividend for BCI, and being the major shareholder, their interest should be aligned with the minority shareholders.

The Golden and Bund centers are *40 years and 50 years lease, golden will expired in 2033 and 2045 for Bund. Yes there is this uncertainty of what happens after the lease expired. For some properties in shenzhen, lease was automatically renewed for 40 years for 35% of the property value or taken back and compensated with depreciation costs, for commercial and industrial properties which typically has 50 and 40 years lease, expiry will soon starts to kick in 2030s like the ningbo golden center, we will see how it goes. There could be a few scenarios. BCI could choose to sell their properties before the lease expire ( maybe result a delisting or cash company) or extend the lease for a fee ( raise fund through capital market) or give back the property to the government and probably get a compensation.

So if there is any action to be taken, it could be within the *15 to 16 years before ningbo's property lease expired. That could set up a hint as to what plan BCI might have for Bund Center. It is something to look forward to.

Bluechipfan :

Just to add, i am now hunting for value stocks once again as in 3 months time, I intend to use my SRS fund (can afford not to do anything for long long time once vested) to acquire some undervalued shares and/or growth stocks. One aspect I look at is the dividend yield cos I must be able to get paid while waiting. This is in watchlist now.

Bluechipfan :

Not too long ago I think a house also highlighted the value of this stock. The issue is that it is very illiquid and therefore, whether the value can be realised or not is entirely up to the major holders. They can afford to lock up their capital but personally, I would like to be able to sell if I need the cash. Having said that, I generally agree with your analysis and will contemplate my next course of action in due course.

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ozxinvest
Expiry:
Target Price
$1.0
(+29.87%)
NOW:

$Bund Center(BTE.SI) . Initiated a small position recently.

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ozxinvest

This is another hypothetical buy and hold Portfolio based on hotel theme. It consists of 3 undervalued stocks and each has a different catalyst which might send the price up.

$Far East Orchard(O10.SI) EP $1.535
Catalyst is the completion of Harbourfront Balmain in Sydney Australia to be booked in Q4 and possible special dividend for 50th year anniversary.

$Bund Center(BTE.SI) EP 78¢
Catalyst would be a potential candidate for delisting to unlock it's assets value.

$Hotel Grand(H18.SI) EP $1.46
Catalyst is Chancellor@Orchard which has been put up for sale.

In reality, I have all 3 stocks but I don't just only buy and hold, but trade to reduce holding costs. As this is a hypothetical Portfolio, we will see what happens after one year if we were to buy them on this day. It's executable as the volume allows us to do so.

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Attachment(s):
ozxinvest
Expiry:
Target Price
$1.0
(+29.87%)
NOW:

$Bund Center(BTE.SI) . Initiated a small position recently.

Read more

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