Tuesday, July 19, 2011

K-Green Q2FY2011

Key Figures

EPS (1H FY2011)  = 1.26 cents
DPU - 3.13 cents
NAV (as at 30th June 2011) =$1.13
Net Assets = $708,798,000
Nbr of Shares = 629M (approx)

The key metric I monitor for K-Green is really NAV besides the DPU.If NAV deteriorates excessively, it signal trouble.

SMRT & SBS - Excessive Profits??

Recently, an application for a fare hike of up to 2.8% has been submitted jointly by SMRT and SBS to the PTC for consideration and approval. Not unexpectedly, there is a widespread outcry especially in the online world against such a move. It smacks of excessive profiteering on the part of the operators at the expense of the commuters. The WP, though Gerard Giam has launched a much lauded criticism against the move and reiterate his call for a nationalised transport operator operating solely based on cost recovery and certain efficiency KPI metrics. A key cornerstone of his argument is the currently excessive profits made by SMRT and SBS which could be used to improve services and reduce fares.The question really is his argument logical and implementable??

Currently, SMRT and SBS made a net profit of $162M and $54M repectively in 2010.  If you look at the profit per trip, i did a rough calculation and it came up to around 0.18 cents and 0.054 cents respectively. A closer examination of SMRT balance sheet reveal that they actually made a loss on their bus and LRT operation. Additionally, a large segment of the profit actually came though renting and advertising. If you strip these elements away, the profit per trip for SMRT is actually around 0.12cents. I suspect the same logic apply for SBS, albeit at a smaller scale. So, we have the following:-

SMRT (profit per trip, 2010 est) = 0.12 cents
SBS (profit per trip, 2010 est)     = 0.05 cents

Firstly just by looking at the numbers, I do not think these are excessive figures to look at, especially when the operators need to reserve a certain of the profit dor future maintainence and upgrade works. For SMRT crucially, if they had not gone into renting and advertising agressively, the profit per trip may even be flat or negative in view of the much higher margin derive from renting and advertising.

If we go by the WP suggestion of a nationalised transport operator with the current efficiency and cost structure, I am not convinced we can do better on cost per trip basis. More likely, a nationalised transport operator without a profit driven motivator will not likely to pursue alternative revenue streams to subsize the commuters.

Thursday, July 14, 2011

Eurozone Crisis

Lately, I have been doing some active reading into the Eurozone Crisis. Why should I be interested as I am barely exposed to the economic and monetary activities that happen over there. The short answer is that it will have significant impact with some violent swing on my portfolio valuation if the crisis escalate. I am not new to the unfolding of the unravelling of the economies on the southern peripheral of Europe having seen how it erupted in last June. I like to speculate on two key questions:-

1) Will Greece default? I think Greece will ultimately default as the debt relative to GDP is too large, the economy is contracting aggravated by austerity measures and a basically uncompetitive economy. The Greeks had too much of a good time for the most part of the earlier decade upon their entry in the Eurozone and now they are paying the price. I hope the EU will be able to engineer an orderly default to contain the spread of the crisis. Is this bad for us? Yes, it will shake confidence in the short run but I do not think the local banks are exposed to Euro bonds ie specifically Greek bonds. I still have the scenario of the Dubai default firmly imprinted on my mind. DBS was affected but not too a large extent. The Greek, French and German banks will have to borne the bulk of the haircut.

2) Will it spread to Italy and Spain? If these two are hit, I think there will be a big crisis on hand. For Spain, I really do not yet have a feeling on how things will turn out. But for Italy, I have a strong conviction they will get through. Italy deficit is relative small (about 4%), the debt to GDP still manageable though large, the banks have not gotten into the property bubble and more than half the debt are held by the Italian themselves. With some demonstrated will, Italy should be able to bring down the deficit, it should be able to scrap through. Italy for the record has been grinding on unspectacularly for decades plaqued by uneven growth rates between the North and South.

As a side note, the debt limit negotitation is basically a game of political brinkmanship play mainly by the Republicans. You get to see how stupid and ridiculous Americans can be!!!Maybe,you can say the same thing about us too.

Tuesday, July 12, 2011

SPH 3Q2011

Some numbers that I keep track:-

EPS = 7cents
NPAT = 115M
NAV = $1.33
EPS(YTD) = 18 cents
Total Liabilitiess = 1.761B


1) Print Classified decreased by $3.2M (1.6%) mainly due to lower classified ads. Circulation revenue steady at $53.8M
2) Rental rev from Clementi Mall for 3Q2011 is $6.0M

Tuesday, July 5, 2011

DBS Script Dividend

Based on the recent announcement on the SGX, a total of 33,634,860 shares were issued for the recent script dividend.  I did a quick calculation and derive that the take up rate for the script dividend is above 70% at a price of$13.83cts.

I did not opt for script dividend this time.

Monday, July 4, 2011


Cityspring has recently announced a renounceable 11 for 20 rights issues at a discounted price of 39cts. This is the second rights issue within 2 years upon IPO. As I am vested into Cityspring mainly after the first rights issue, I like to sketch up the overall financial health of Cityspring while contemplating whether I should take up the proposed rights.

Cityspring IPO in Feb 2007 at a price of 89cents with a total of 450 million shares. Temasek inital stake is about 28.5%. A sum of $286M was raised at IPO. At that stage Cityspring will have a $128M term loan at SingSpring level and a $370M term loan at Cityspring level.

In July 2007, it acquired Basslink  for a sum of $A1,175M (SG$1500M approx). It was financed 75% with debt raising three bonds, a A$486 floating rate bond due 2015 and two A$190 fixed rate capital indexed bonds due 2017 and 2019 respectively. The equity portion amount to $375M.

In Nov 2009, it issued a 1 for 1 rights price at 48cts. The proceeds went mainly to partially repay the Cityspring loan down to $142M. Net proceeds from rights is $227.5M with a total number of 489,965,504 rights issued. TERP was at 63cents

With the current rights call this July 2011, it is raising gross proceeds of $210M of which A$145M (SG$190 approx) will be utilised to reduce the A$ denominated bonds over time. The total number of shares after the rights issue will be 1,520m shares. TERP will be at 48cents

Assuming the rights go through, the total amount of cash raised from shareholders upon IPO is about
$286M + $227.5M + $210M = $723.5M. The total number of shares will be

As at May 2011, net asset is at $357M. Net asset after ongoing rights will be at $567M. Total borrowing after paring down the A$ denominated debt is $1.2B. Total asset as at May 2011 is $2.15B. Currently, assets are split evenly between Singapore and Australia.

Asssuming I get the dps for the quarter ended June 2011, I will have gotten 8 * 1.05 = 84 cents in total counting after the first right issue with an average purchased price/shr  at 58.7 cents including commissions. My net cost will about 50cents off accumulated dps which is close to expected TERP of 48 cents.

I conclude that I will probably make a small overall gain on cityspring if I take up the rights but definitely NOT the 7% dividend I was expecting from it. From a positive note, Cityspring will significantly pare down its borrowing from a unsustainable position after the two rights issues.

The problem with CitySpring to date is that it overpaid for Basslink even though non-recourse financing arrangements are in place to protect the trust in case of Basslink failing. The group of investors who suffer the most are those that went in at 89 cents at IPO and higher. For those who went in after the first right issues, they probably break even, eke out a small gain or sustain a small loss. I am actually optimistic for those who are coming in now or planning to come in just after the second rights issue as the initial investors have largely borned the overpayment at Basslink.

I know a lot of investors are disappointed with CitySpring especially the ones that went in at IPO. I am also disappointed that I did not get my expected 7% dps to date. That is life. But I think I going to be emotionally detached and not divest hastily at the current price at 50.5 cents but to go for for the rights instead as I see significant improvement in its borrowing situation compare to what is immediately after the Basslink purchase. It is good news that the former CEO has left (maybe ask to leave if I may speculate) since he is largely responsible for Cityspring initially excesssive leverage model.

Also the trust management hefty initial performance bonus is given in terms of shares which may have been diluted by now to something more reasonable.