yes you are right. thx
(04-03-2014, 11:05 PM)safetyfirst Wrote: would it be more accurate if we just take 117m of trade receivables minus off the non controlling interests of 27.6m?
As I’ve long told you, Berkshire’s intrinsic value far exceeds its book value. Moreover, the difference has widened considerably in recent years. That’s why our 2012 decision to authorize the repurchase of shares at 120% of book value made sense. Purchases at that level benefit continuing shareholders because per-share intrinsic value
exceeds that percentage of book value by a meaningful amount. We did not purchase shares during 2013, however, because the stock price did not descend to the 120% level. If it does, we will be aggressive.
- paragraph from Berkshire Hathaway 2013 shareholder letters
Q: Do you expect the gearing to come down by the end of the current financial year?
Lee Sze Hao: With the TOP of The Laurels, we expect our gearing to come down a lot. What level it goes down to depends on whether we reinvest the money into another project. As it is, our gearing is actually at a comfortable level.
For the Robin site, our purchase price was $177 million. We used $70-80 million cash to pay for it. For the Punggol project, the financing is also not very high
http://nextinsight.net/index.php/story-a...g-holdings-
Property is about leverage. Due to 'excess cash' the company does not need to maximise the long term loan for the Robin and Waterwoods projects. This meant that if need to, they can draw loans from the projects when they find a need for excess cash. What happens is that when you use too much cash on projects instead of using loans, your ROE will drop. To be fair it is less risky if you put up more cash rather than take up full loan but looking at the picture, it seems like company could not find any interesting buy at the moment hence using a lower debt/equity ratio to run the projects.
So the question here is why not return the excess cash to shareholders by doing a cash distribution or share buyback? Why settle for a lower ROE meaning using more cash then necessary to do the projects. When the proceeds from The Laurels is received, I guess in order to show that cash level is 'low' they will use the proceeds to reduce more debts and hence even lowering the ROE.(if they could not find interesting buy). Not to forget they will also receive more cash when Robin is launched.
Why not let shareholders decide how to maximise their returns by returning cash to them?
Take Share Buyback for example. NTA right now is 56 cents. If company does a share buyback at 40 cents. For every 1 lot($400) the company buys, it would be buying $560 worth of assets. That's making $160 per lot or a 40% return with just a click on the PC or a phone call to the remiser. Tell me where can you find a 40% return. Isn't it a better ROE than reducing debts? Yes the pie gets smaller with each buyback but the continuing shareholders will get bigger piece of the pie. One argument the mgmt. popped up is that share buyback will artificially push up the share price. Stock market is about demand and supply and if there is a share buyback and exercised, most probably share price will run up. If management is afraid of 'artificially' share price, why not spread the share buyback into quarterly. For example buying an average 5m shares per quarterly. They can also set up a maximum price which they target for share buyback. Let's say 0.8 NTA or 1 NTA after which they would not buy above the value. Share buyback is less risky than investment because you are buying your own company. Company you know best. Unless one doubt its own receivables and cash.
Why Warren Buffet willing to pay 120% above book value is that he feels that the intrinsic value of his company is worth more than book value. Is Sing Holdings worth more than book value(56 cents)? Well you have office units at cost and plot of land in Robin bought a few years back so my guess is that it is worth more than book value.
Which is why I am concern with the share performance. Why aren't they doing the obvious (share buyback) ? Or are they in the process of finding or found an investment that returns an above 40% return?
(I will stop writing and let's concentrate on getting more minority shareholders to join us)
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