Amara Holdings

[hh488]

Dorsett, a hospitality group listed in HK, is currently valued at 0.64x book value. Hotel assets are valued at cost. Stock price was last traded at $1.27 HKD. It's RNAV is at least $7 HKD. Estimated annual dividend payout is about 4c, which translates to about 3.1% yield. Most of its hotels are located in HK, with the rest in China, Malaysia, UK and Singapore.

So it's trading below 0.2x RNAV. In general, most of the hotels listed in HK are trading way below book value. Amara is still not as cheap in terms of valuation. Having said that, the stock prices of hospitality companies in HK has been on a down trend for the past few years and has yet to bottom out. It might take years for investors' interest to return to this sector.

Another sector that has been on a downward spiral since 2011 is the departmental store sector in China. Earnings peaked in 2013 and stock prices of this sector had been sold down to below book value, and about 49-50% below RNAV. Even our dear GIC is suffering heavy losses. It was vested in Intime at $9.90 and has recently cut losses at $4.3+. The PE of a Intime and it's peers are trading at about 7x PE (TTM) with 5-8% dividend yield.

In conclusion, we can't value stocks based on book value of its property assets alone. Investors sentiments and perception of the sector/industry can remain pessimistic for years before interests return to the sector. In return, what one might be compensated for is hopefully the high dividend yield while waiting for the value to be realized. So in my view, Amara do not meet the dividend yield criteria. It's valuation is not that cheap either.

wah Dorsett got delisting offer. Equiv to abt HK$1.80. Missed out on this.

[Boon]

http://infopub.sgx.com/FileOpen/AHL_FY20...eID=390454
 
FY2015 Results:
 
Revenue (Group)  - (SGD million):
FY2013 = 80.678
FY2014 = 75.900
FY2015 = 82.425
 
Revenue (Hotel Investment & Management) – (SGD million):
FY2013 = 52.610
FY2014 = 53.333
FY2015 = 56.649
 
(Note: Revenue contribution from Amara Bangkok Hotel Thailand in FY2015 was only SGD 2.951 million)
 
Revenue (Property Investment & Development) – (SGD million):
FY2013 = 25.356
FY2014 = 19.854
FY2015 = 23.234
 
NPAT (Group)  - (SGD million):
FY2013 = 26.798
FY2014 = 35.299
FY2015 = 14.332
 
EPS (SGD, cent):
FY2013 = 4.64
FY2014 = 6.12
FY2015 = 2.49
 
OCF (SGD million):
FY2013 = 36.533
FY2014 = 14.527
FY2015 = 23.432
 
Payment for PPE (SGD million) :
FY2013 = 30.463
FY2014 = 41.484
FY2015 = 37.670
 
Cash & Bank Balance (SGD million):
FY2013 = 12.565
FY2014 = 12.813
FY2015 = 13.445
 
Debt (SGD million):
FY2013 = 221.807
FY2014 = 259.332
FY2015 = 287.345
 
Interest Paid (SGD million):
FY2013 = 3.782
FY2014 = 3.795
FY2015 = 6.542
 
DPS (SGD Cent) :
FY2013 = 1.0
FY2014 = 1.2
FY2015 = 1.0
 
NAV (SGD Cents):
FY2013 = 53.16
FY2014 = 58.64
FY2015 = 60.22
 
Comments:
1)  Revenue contribution from the new Amara Bangkok hotel in FY2015 seem low – only SGD 2.951 million. For a 250-room hotel, revenue of SGD 2.951 m over a 9 month period (~ 274 days) works out to be around SGD 43 per room per day. Wondering how long would it take to have a stabilize revenue? But the Management is of the opinion: “Since the soft opening of Amara Bangkok in March 2015 we have reached full operation, and going forward, it should contribute to the performance of the Group”. Will see !
2)  As usual, no breakdown of revenue between “property investment” and “property development” – have to wait for AR2015.
3)  NPAT and EPS decrease in FY2015 compared to FY2014 due to drop in fair value gain of investment properties, increase in depreciation, increase in staff cost (additional head counts for the newly opened Amara Bangkok Hotel) and increase in finance costs (as a result of increase in borrowing)
4)  However, OCF generated increase from SGD 14.527 m (in FY2014) to 23.432 m (in FY2015) – enough to cover finance cost of 6.542 m and dividend payment of around 6 m – but not enough to cover a further investment in PPE amounting to 37.670 m in FY2015 – short fall was covered by more borrowing.
5)  Finance cost has increased as result of increase in borrowing.
6)  DPS has been reduced from 1.2 cent (in FY2014) to 1.0 cent in FY2015. This translates into a dividend yield of 2.5% based on share price of SGD 0.40
7)  CityLife@Tampines, a fully sold Executive Condominium which the Group has a 40% stake in, achieved its Temporary Occupation Permit on 3 February 2016. The Group expects to recognise profit from this project from the first quarter of FY 2016.
8)  No update on its Shanghai project – probably have to wait for AR2015. Wondering what is the outstanding investment amount needed to complete this project, and how long after completion before it could contribute positively to the top and bottom line of the group?
9)  Overall, it seems that the Group has been embarking on overseas investment properties in new markets (namely the Amara Bangkok Hotel and the Shanghai mixed development project) over the past few years – funded partly from internally generated cash flow from its Singapore operations and partly from borrowing.
10)  These overseas investment properties seem to take longer than usual to complete and stabilize. Could these new investments in overseas leasehold projects generate a good enough return to shareholders in the long run to justify the Management’s initial decisions to invest in them in the first place? I would think so but only time will tell I suppose. And I wouldn’t be worrying too much if these were freehold assets.
11)   Going forward, once the capital investment in the Shanghai project is fully invested, investment in PPE would only be limited to maintenance capex, assuming there is no new project in the pipeline. The need for new investment funding would ease off.
12)  OCF would be further improved once AMARA Bangkok hotel and the Shanghai project could start generating positive OCF for the group. But these seem to be taking longer than usual.
13)   Profit recognition for CityLife@Tampines starting 1Q2016 would also improve OCF going forward.
14) By then, with the improved OCF (and assuming no available new projects to invest in), what would likely be the management's decision in dealing with the excess OCF generated ? Pay down debt ? Increase DPS? Or both? 
_____________________________________________________________________________________________________

[persia]

1 cts (final) + 2 cts (special) dividends... around 6.5% dividend yield based on yesterday's close.
Finally some reprieve for long suffering shareholders... 

[babyblue]

I suspect more upside to come ahead. 

The hotel assets are grossly undervalued, not unlike a few other coys like St******. the difference is that Amara is going to open a shopping mall, hotel and office tower in shanghai. huge development, many rooms, many leasable space. in Jing an qu. Like novena of Singapore. Near the mrt. And a pretty busy area. 

This will add a significant chunk of value. you may do your own earnings projection but to put things in perspective, Amara has 2 hotels and a shopping mall in Singapore. The shanghai expansion is close to doubling Amara's profit centres.

not only that, if you chart Amara's growth over the decades, you see a pattern of accelerating growth. from one hotel in tanjong pagar, it took awhile to get the 2nd, the shopping mall and office came online, and another hotel in bangkok and now 1 hotel, mall and a shopping centre in shanghai. each significant development taking lesser and lesser time. essentially with more and more income producing properties or profit centres, Amara will experience accelerating growth not unlike a compounding effect.
will be interesting to speak to management to find out about their expansion. but check who recently joined the company. and her credentials. im willing to bet Amara's founding family is not willing to just stand still.

so in short 1) grossly undervalued in the first place,  2) upcoming Shanghai profit centres to start operation to add significant chunk of value 3) more income producing properties is the foundation for accelerating growth. 

lets not forget it has done pretty well in its property development. boss may be conservative but he is a savy capital allocator.

[cfa]

Do Amara revalue its Hotels and other assets ?

[Boon]

I suspect more upside to come ahead. 

The hotel assets are grossly undervalued, not unlike a few other coys like St******. the difference is that Amara is going to open a shopping mall, hotel and office tower in shanghai. huge development, many rooms, many leasable space. in Jing an qu. Like novena of Singapore. Near the mrt. And a pretty busy area. 

This will add a significant chunk of value. you may do your own earnings projection but to put things in perspective, Amara has 2 hotels and a shopping mall in Singapore. The shanghai expansion is close to doubling Amara's profit centres.

not only that, if you chart Amara's growth over the decades, you see a pattern of accelerating growth. from one hotel in tanjong pagar, it took awhile to get the 2nd, the shopping mall and office came online, and another hotel in bangkok and now 1 hotel, mall and a shopping centre in shanghai. each significant development taking lesser and lesser time. essentially with more and more income producing properties or profit centres, Amara will experience accelerating growth not unlike a compounding effect.
will be interesting to speak to management to find out about their expansion. but check who recently joined the company. and her credentials. im willing to bet Amara's founding family is not willing to just stand still.

so in short 1) grossly undervalued in the first place,  2) upcoming Shanghai profit centres to start operation to add significant chunk of value 3) more income producing properties is the foundation for accelerating growth. 

lets not forget it has done pretty well in its property development. boss may be conservative but he is a savy capital allocator.

The shanghai expansion is close to doubling Amara's profit centres?

Singapore:
Amara Singapore = 388 rooms
Amara Sanctuary = 140 rooms
 
http://www.hotelnewsnow.com/Articles/123...ore-hotels
 
Shanghai:
Amara Shanghai = 343 rooms (~ 65% of rooms in Singapore)
 
http://hotelnewsnow.com/Articles/65311/S...-July-2016
 
Revpar in Shanghai < 50% of Singapore
__________________________________________________________________________________________ 

[Boon]

I suspect more upside to come ahead. 

The hotel assets are grossly undervalued, not unlike a few other coys like St******. the difference is that Amara is going to open a shopping mall, hotel and office tower in shanghai. huge development, many rooms, many leasable space. in Jing an qu. Like novena of Singapore. Near the mrt. And a pretty busy area. 

This will add a significant chunk of value. you may do your own earnings projection but to put things in perspective, Amara has 2 hotels and a shopping mall in Singapore. The shanghai expansion is close to doubling Amara's profit centres.

not only that, if you chart Amara's growth over the decades, you see a pattern of accelerating growth. from one hotel in tanjong pagar, it took awhile to get the 2nd, the shopping mall and office came online, and another hotel in bangkok and now 1 hotel, mall and a shopping centre in shanghai. each significant development taking lesser and lesser time. essentially with more and more income producing properties or profit centres, Amara will experience accelerating growth not unlike a compounding effect.
will be interesting to speak to management to find out about their expansion. but check who recently joined the company. and her credentials. im willing to bet Amara's founding family is not willing to just stand still.

so in short 1) grossly undervalued in the first place,  2) upcoming Shanghai profit centres to start operation to add significant chunk of value 3) more income producing properties is the foundation for accelerating growth. 

lets not forget it has done pretty well in its property development. boss may be conservative but he is a savy capital allocator.

"each significant development taking lesser and lesser time. essentially with more and more income producing properties or profit centres, Amara will experience accelerating growth not unlike a compounding effect." 

The land in Shanghai was bought in 1996, which has a land use rights of
 45 years and 40 years commencing
 May 1997 and
 July 2004 respectively.
 
Assuming Amara Shanghai is going to be opened for business this year. It means it took them 20 years (from acquisition) to complete this project – with 25 years land use rights remaining.

ROE would be a better measure, I reckon.....
______________________________________________________________________________________________________

[persia]

Anyone heard any news on this counter? What's behind the sudden surge? 

[melissalee7676]

Anyone heard any news on this counter? What's behind the sudden surge? 

There's an article in the New Paper today that has a BUY for this stock (by RHB) at target price of 0.88, I guess this is why. But we have to do our own due diligence.

[persia]

Anyone heard any news on this counter? What's behind the sudden surge? 

There's an article in the New Paper today that has a BUY for this stock (by RHB) at target price of 0.88, I guess this is why. But we have to do our own due diligence.

Ah, I c... thanks for sharing..