Tuesday, November 18, 2014

CitySpringTrust And Keppel Infra Trust Merger

The proposed merger of CitySpring Infrastructure Trust (CIT) and Keppel Infrastructure Trust (KIT)has been announced.KIT also announced that it will acquire 51% of Keppel Merlimau Cogen (KMC) which own a 1300 megawatt combined gas turbine generation facility on Jurong Island for a cash consideration of $500m based on a enterprise value of $1,700m.The KMC acquisition will form an integral part of the merged entity.The combined entity will be Singapore largest infrastructure-focused business entity with a market cap of about $1.9b and assets of about $4b.

Each KIT shareholder will receive 2.106 units of CIT shares for every unit of KIT share held.Keppel Infrastructure Holdings and Temasek through its subsidiary will be the two largest shareholders at 22.9% and 19.97% respectively. CIT will be the surviving trust and be renamed as Keppel Infrastructure Trust and KIT will be dissolved following completion. Current trustee manager of CIT will resign and current trustee manager of KIT will be appointed the trustee manager of the combined trust. As saving of $3.6m of management fees is expected from this arrangement.

The purchase of KMC will be financed through  non-renounceable of preferential shares to existing shareholders and private placement to institutional investors to raise up to $525m in gross proceeds.The transaction is accretive to CIT unitholders and the proforma distribution will be 3.67 cents per CIT unit higher than the current 3.28 cents.



Sunday, November 16, 2014

CourtAsia - A Fallen Stock?

A few years back, I wrote a short post on why I will give CourtAsia IPO a miss because of their previous track record of being listed in the stock exchange and was taken private when the stock price hit rock bottom.The IPO went ahead at 77 cents per share without my participation of course since I am just small fry anyway.BTW, Alibaba B-to-B business was also previously listed in HKEx and taken private by Jack Ma when the share price flounder. So, we have to use judgement on a case by case basis and not to simply generalise.

For a while there was euphoria surrounding the stock and management quickly took advantage of the environment to raise a lot of debt to finance their expansion into Malaysia and particularly Indonesia.In fact more than $300m debt was raised which is more than the current market cap of around $200m.I have to say that the courts management has been very good in utilising others people money to finance their growth expansion from debt and equity (through IPO).

However, over the last one and half years, it is clear that the company business has fallen on very hard times. The recent quarter net profit was a just a meagre $1.7m inclusive of a $3m restructuring charge.The stock price has halve to 40 cents from the IPO price of 77 cents. I wonder what the cornerstone investors were thinking when they back the IPO?

Currently it would seem to be a good entry point if you just look at the NAV value of around 50 cents. It seems offer  safety margin that most value investors like to have when they invest in a stock.However, I am still not persuaded because I am of the opinion that if the expansion in Indonesia run into hiccup, then the writeup off would be substantial and NAV will plunge.So far, court operating track record has not been good other than their  Singapore business where they can optimise the compact physical environment.  But even that, the Singapore business also seems to be running into significant problems looking at how sales plunge for like-and-like stores in the recent quarter.

Thursday, November 13, 2014

SIA Engineering vs SATS - A Comparison

SIA Engineering and SATs are both subsidiaries of SIA and involved in mainly the same core business eg aviation although SATs do derive a substantial non-aviation revenue too from food catering. I did a simple 1HFY14/15 comparison of their results.

                                      SIA Engineering                SATs
Net Profit                        $95.6m                              $90.4m
Net Profit Margin           16.5%                                10.3%
EPS                                 8.5 cents                            8.1 cents
NAV                               113.5 cents                        112.6 cents
Cash & Cash Equiv        $391.2m                            $338.4m
Debt to Equity Ratio       negligible                          0.08             

Looking at their relative EPS, it will appear that SATs is a better bargain than SIA Engineering (at least for 1HFY14/15) taking into consideration that SIA Engineering and SATs traded recently at $4.15 and $2.96 respectively.However, like to take note that SIA Engineering underperformed in the last half year relative to their past history because of some undergoing structural changes in the industry.A lot boil down to whether they can reinvent to be on top of these changes and deliver the stellar performance as in the past. As for SATs, their performance has been flat over the last few years supported by a solid dividend policy and little debt.

SAT 2QFY14/15

Revenue                                   = $442.2m
Operating Profit                       = $42.5m
PATMI                                     = $47.1m
Underlying Profit From Ops    = $47.1m
Underlying Net Margin            = 10.7%
PATMI Margin                         = 10.7%
Debt-to-Equity                          = 0.08
EPS                                           = 4.2 cents
DPU                                          = 5 cents
NAV                                         = $1.26
Cash & Cash Equiv                  = $338.4m
FCF                                           = $41.2m

Revenue decreased 2.2% yoy.Food Solutions revenue decreased by 4.7% yoy partly offset by Gate Services revenue which increased by 2.1%.PATMI decreased by 3.3% to $47.1m.

Monday, November 10, 2014

Super Group - Recent Analyst Estimates

Below are some of the analyst estimates after Super Group recent disappointing results.

Super Group cut to "sell" from "neutral", target cut to 90 cents by OSK-DMG
Super Group upgraded to "hold" by Maybank Kim Eng; target at $1.02
Super Group price target cut to 83 cents from $1.42 by CIMB

It would seems that my rough layman estimate of  87 cents (entry point) in a previous post is not quite far off the mark compare to the above.If you bother to scrutinise the shelves of local supermarket stores, it is obvious that the competition for 3-in-1 coffee is intense.

Sunday, November 9, 2014

Super Group

Super Group just released its third quarter results. It is not pretty.Business Consumer dipped by 6% yoy to $82m.Food ingredients increased by 3% yoy to $47.5m. Net profit dropped by 46% yoy to $10.5m due to cost pressures (palm kernel oil) and higher effective tax.EPS for Q3 is 0.89 cents and 3.84 cents YTD.NAV is at 41.37 cents.

It would seems that growth for this former consumer darling stock has all but evaporated.If we assume a annualized eps of 5.12 cents (3.84* 4/3) and a  PE ratio of 17, then a "reasonable" entry price to look at will be 5.12 * 17 = 87 cents. This would is yield a Price to Book Value ratio of 2.1.

based on the very rough estimate given above, I would still think that the stock is overvalued at the current price of around $1.06.

SIA Engineering

I am not vested in SIA Engineering but it has always been in my radar in view of its solid track record, low or little debt,consistent dividends policy and seemingly high barrier of entry business. However, the recent set of results from SIA Engineering and in fact also the last half a year is rather shocking in my view. Net profit margin has dropped by 30% to 40%.The issues if you read the fine print will point to structural change ongoing in its business. Engines improvements, extention of "on wing" life of certain models and accelerated retirement of older engines all result in a drastic drop in visits to the workshops.It appears all quite certain the trend will accelerate as you can expect more and more newer engines models coming on board that will reduce the need of more frequent maintainence.In other words, the OEMs provider have cut into SIA Engineering space.

With this ongoing structural change, previous record of SIA engineering performance is no longer a good gauge of future performance.I am of the opinion that the company will need to undergo a catharsis of change with no certainty that it can emerge the better of it than before.

Hence, I am going to leave this counter alone although there is a recent significant price drop.