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(12-08-2011, 03:21 PM)freedom Wrote: re-valuation gain continues to be the biggest contributor to the profit, excluding revaluation gain, operational profit would be around 3 million only.
as an asset play, there is always the question, can you sell it at the valuation, especial an expensive asset like JP valued at around 1.5 billion?
Conceptually, the operating profit of a shopping mall developer over the lifetime of ownership of the property asset includes: (1) recurrent rentals collected from tenants (including variable rents linked to retail sales), plus other sources of operating income, e.g. car park fees, maintenance service charges, in-mall advertising/promotion, etc.; and (2) the gain from the eventual sale of the mall to a 3rd-party. As the mall - in this case, JP - is treated as an investment property for accounting purposes, it is a common treatment to "mark it to market" at least on a yearly basis before its value is recorded in the B/S. The relevant question to ask is whether the valuation applied is done professionally and on a realistic (or conservative) basis, reflecting the achievable prevailing fair market value of JP.
As JP is a high-quality and highly successful mall generating sustainable and high rentals, many Reits and other property investors (e.g. SPH, NTUC Income, CapitaLand, CDL, etc.) should view it as a desirable investment target. The inhibitions for a deal in this case are more on whether we have a willing seller - in this case, LKT and Guthrie GTS - and the price to be negotiated. If we look at what CapitaLand Group was prepared to pay for their latest land acquisition for a new mall in Jurong east just this year, and what SPH together with NTUC Income were prepared to pay for Clementi Mall last year, it will be reasonable to believe that a transaction on JP close to the current valuation is highly conceivable and can be quite easily achieved under normal market conditions. I guess at the end it will also depend on the yield the prospective buyers want and financing, but property deals over a billion $ are quite common in Singapore nowadays.
freedom Wrote:the other thing I don't like is that normally as a company other than a reit, loan on investment properties should be amortized as a conservative way of managing debt risk. But the company simply just rolls over the debt. it does not look to me as a long term asset owning strategy.
You may be interested to note that LKT together with Guthrie GTS have been tapping the SGD Bond market for low-cost long-term funding of JP, via a SPV called Winmall Ltd .....
http://info.sgx.com/listprosp.nsf/5ec09b...000131755/$FILE/Final%20IM.PDF
And a big portion of the bonds issued were rated 'AAA' - i.e. even a notch better than U.S. Treasury's 'AA+' now!