Metro Holdings

[greengiraffe]

Hi All,

I am a new member. I did the following note dated 19 June 11:


Upon further checking of published information, I am making amendments to the note that I have emailed earlier. The following changes will supersede the previous content. Sorry for the over-sighting due to lack of investigation and research on my part.

BEIJING CITY HARVESTED, HUAT AH…

Metro made a late announcement to SGX today – it reveal details of sale of Metro City Beijing, about 2 months after it first announced the intention to dispose of the retail property alongside its long term China state owned enterprise partner.

Metro will reap a pretax profit of S$87.4m and an estimated net profit of around $69.92m (assuming 20% tax). Cash proceeds from the sale will amount to S$132m. In addition, S$95m debt related to Metro City Beijing will be eliminated with the sale of the stake in the asset company. (Erratum: The amount is lower than my initial back of the envelop estimates as Metro revealed that the asset company has total debts totalling RMB1.0bn (details of which was not previously available publicly)

Based on my original estimates, total net cash per share post accounting of Gurney extension, Penang at $0.424/share will swell further to $0.753/share (Erratum: $0.615/share) upon the successful conclusion of the sale of Metro City Beijing.


HIDDEN VALUE APLENTY

The following are the revised key statistics:

NTA post above transactions (1 of which is locked in – Gurney Plaza extension sale): $1.655
Net cash per share: $0.752
Current share price: $0.915
Discount to NTA (Including Cash Hoard): 44.7%

Net of cash:

NTA: $0.902
Share price: $0.163
Discount to Core Assets (Net of Cash): 81.9%


MORE UPSIDE TO CHINA PROPERTY VALUATIONS

Property Stake(%) NLA(sqm) Occ Rate(%) Valuation(S$m)*
Metro City, Shanghai 60 39,423 98.3 241
Metro City, Beijing 50 116,846 74.5 320
GIE Tower, Guangzhou 100 28,390 95.2 91
Metro Tower, Shanghai 60 40,039 84.3 168
EC Mall, Beijing 31.7 28,974 89.1 316
Frontier Koishikawa Building, Tokyo 100 5,124 73.2 87
Completed Property Portfolio
*100% basis

Metro City Beijing was sold at a hefty 50% premium to its latest valuation as at 31 Mar 11. The implied net yield on Metro City before tax is 2.575% on the sale price. It should be noted that it is also the top under-performing assets within Metro’s China property portfolio. Logically, the better performing assets should easily fetch good premium above their respective valuations.


SUBSTANTIAL REDUCTION IN COLLATERISED DEBT

Based on Metro’s latest financial statements to 31 Mar 11, total collaterised debt will be reduced by 38% to S$156.6m and will be attributed as follows:

- 100% owned Frontier Koishikawa Building, Tokyo valued $86.7m (and pledged fixed deposit of S$33.6m) with a loan of JPY 6.0bn (S$91.5m);
- 100% owned GIE Tower, Guangzhou valued at 90.8m with a loan of HK$95.2m(S$15.4m); and
- 31.65% owned EC Mall, Beijing valued at S$100.1m with a loan of RMB 258.5m (S$49.7m).

It appears that Metro’s 60% owned Metro Tower and Metro City in Shanghai carry no gearing at all. Both assets generated a profit before tax of close to S$40m according to notes to account 34b on page 99 of Metro’s annual report 2010.

MORE SPECIAL DIVIDENDS TO NARROW THE GAP IN REAL WORTH

With a swelling cash hoard and Metro’s historical willingness to enhance shareholders’ wealth, it is highly likely that shareholders can look forward to special dividend payments. The return of excess cash to shareholders going forward will also narrow the gap between the traded market price and Metro’s true net worth. Established case studies on the SGX include Singapore Shipping Corp and Cougar Logistics, both controlled by hotelier cum shipping tycoon, Mr Ow Chio Kiat.


TRACK RECORD IN CHINA WELL ENTRENCHED

Metro’s recent sale of China property projects which started last financial year (FY3/11) should start to remove doubts over management’s capability to generate adequate returns for shareholders in the highly competitive China market. Unlike other big Singapore developers, Metro has already harvested sizable returns from its foray in China. Management’s eye for quality developments and strategic investments has delivered high quality cash returns to shareholders and will sustain a pipeline of new assets for future growth in shareholders’ wealth. If there is really a good proxy amongst Singapore based property investor/developer in China, it is none other than Metro. Just ask how far can one be wrong over an asset based company whose share price is backed solidly with cash….

FY 3/2004 – Exceptional gains of S$230.1m from securitisation of Ngee Ann City

FY 3/2005 – Invested US$50m in Shui On Land (Pre-IPO), Invested US$25m in ICT Plaza, Urumqi Xinjiang China, Up stake in Gurney Park from 39% to 48.5%

FY 3/2006 – Exceptional gains of S$118m from disposal of junior bonds and preference shares of Ngee Ann City securitisation, that was eventually listed as Macquarie Prime Reit, now renamed Starhill Global Reit. Bought US$27m bonds issued by Shui On Land (Pre-IPO)

FY3/2007 – Made gains of S$29.1m via sale of 1.7% stake in Shui On Land through IPO and retain balance 1.8% till today. Increased investment in ICT Plaza, Urumqi Xinjiang to US$33m.

FY3/2008 – Made S$31.9m via sale of associate stake in Gurney Plaza to Capitaland Group with options being entered for subsequent sale of Gurney Plaza extension at a future date. Undertake developments of 1 Financial Street, Metropolis Tower and EC Mall (all in Beijing) with HSBC Nan Fung China Real Estate (for 1 Financial Street only) and ECM (for Metropolis Tower and EC Mall)

FY3/2009 – Year of Global Financial Crisis. Sold ICT Plaza, Urumqi Xinjiang China – recouping RMB 144.6m in capital contributions and US$10.5m in shareholders loan. ICT Plaza investments yielded Metro a fixed return of 17% pa on capital contributed and 7.8% pa on shareholders loan.

FY3/2010 – Invested US$30.0m for a 10.7% stake in 3 Tesco anchored Mall projects in Anshan, Fushan, Qinghuangdao, China. Invested S$89.7m in Frontier Koishihawa Office Tower, Tokyo Japan.

FY3/2011 – Made S$55.4m net profit from sale of stake in 1 Financial Street, S$4.6m from sale of stake in Metropolis Tower, all in Beijing China. Invested S$50.3m in Top Spring (3688.HK, IPOed at HK$6.25 in Mar 2011, last done HK$5.00. Exercise option to sell associate interest in Gurney Plaza extension and G Hotel in Penang Malaysia for completion by April and May 2011 (post FY3/2011) for combined sale proceeds of around S$58.9m. Invested US$10.5m for a 10.7% stake in 3 Tesco anchored Mall projects in Xiamen, Fuzhou, Shenyang, China.

FY3/2012 – Proposed sale of 50% of Metro City Beijing for RMB 1251m vs book valuation of RMB 834m.

NB: The author has interests in Metro shares.

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  metro-liquid&ltinvestments.xls (Size: 20.5 KB / Downloads: 12) The following note was posted on 19 June 11

I have enclosed a detailed analysis of Metro's net liquid and long term investments analysis. Based on all available information, it came up to 0.915 - exactly its closing share price on Friday (17 June 11).

Essentially, at the current share price, investors are paying for all its net liquid and long term investments. The remaining properties that are sitting there are free and as I have pointed out, I got a feeling that the remaining assets are conservatively valued since they are of better quality than the latest asset that was sold - Metro City Beijing.


Metro Investments, Collateral Assets, Cash & Borrowings Analysis

Shares 31-Mar-11 651.6
Warrants @ 0.63 31-Mar-11 39.8

Fully Diluted Share Cap 691.4

Short term investments 31-Mar-11 67.3 0.097
Collateral assets 31-Mar-11 24.6 0.036
Pledged fixed and banks deposits 31-Mar-11 34.9 0.050
Warrant proceeds 31-Mar-11 25.1 0.036
Cash 31-Mar-11 372.9 0.539

Liquid assets 524.7 0.759

Short term borrowings (55.8) (0.081)
Long term borrowings (195.8) (0.283)

Net liquid assets 273.1 0.395

Post FY Events

Gurney Extension Sales @RM215m 43.2 0.062
Metro City Beijing - RMB688.5m 132.0 0.191
Metro City Beijing Debt Sold- RMB500m 95.0 0.137

Net Liquid Assets Post FY Events 543.3 0.786
Long Term Investments 89.3 0.129

Total liquid assets and LT Investments 632.6 0.915

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  metro-propvalue.xls (Size: 19 KB / Downloads: 7)
  TCT-Huai_Hai_Mall_Acqusition_Final_23-02-11.pdf (Size: 517.34 KB / Downloads: 1) This note is posted on 6 Jul 11

China based commercial REIT, Treasury China Trust (TCT), announced that they have completed the purchase of a retail mall in Shanghai, China today. As the mall only achieved 70% occupancy last year with below market rental, TCT managed to purchase the property at a 20% discount to its conducted valuation as of the time of the announcement of the deal. The per sq m purchase price was RMB75460 vs a valuation of RMB95014 (presumably adjusted for the quality of the rental income stream - 70% occupancy with below mkt rentals)

Metro owns 60% of Metro City Shanghai and the property boast of near full occupancy after a asset enhancement program that is completed last year. Both Metro City Shanghai and TCT's Huai Hai Mall are completed around the same time. However, Huai Hai Mall has an extra 12 years in its lease that will expire in 2042 while Metro City Shanghai's lease runs out in 2029.

The following are key statistics:

Metro City, Shanghai 36 yr term from 1993, Lettable area 39,423sq m, no of tenants 110, occupancy rate 98.3, valued at S$144.6m for 60% stake as of 31 Mar 11.

Based on TCT's latest acquisition price and adjusted for remaining lease tenure, Metro City Shanghai should easily achieve a psm valuation of around RMB55169 or RMB 2.175bn, S$414.3m on a 100% basis and S$248.5m for Metro's 60% stake.

At S$248.5m, it is a cool S$100m above external valuations conducted on Metro City Shanghai as of 31 Mar 11.

I concurred that there are plenty of methodologies to value a property but I think that this is a reasonable desktop valuation.

[greengiraffe]

ST Money Home > Money > Story Jul 18, 2011

From retail to property player
Retail made up just 6.5% of Metro's 2010 bottom line, property the rest
By Lee Su Shyan, Money Editor

Metro has four local stores and five in Indonesia and stakes in malls and buildings in China, including Metro City Shanghai (above) and a Tesco store inside Qinhuangdao's Lifespace mall. -- PHOTOS: ST FILE, METRO HOLDINGS, BLOOMBERG
View more photos

MENTION Metro to most Singaporeans and they think department stores but the firm has pulled off a successful - and lucrative - transformation into a property player.
How lucrative can be seen in the pay packet of Mr Jopie Ong.
As Metro's group managing director, he took home between $8.75 million and $9 million for the year ended March 31. And that was not a one-off. For 2008, Mr Ong took home $9.1 million and a bumper $12.5 million in 2004.
But Metro is much more than a retail player these days. Last year, retail contributed only 6.5 per cent to the bottom line while property brought in the rest.
The firm has only four local Metro stores and five Metro stores in Indonesia. It also holds the franchise for Monsoon and Accessorize speciality shops in Singapore and Indonesia.
On the property front however, Metro has stakes in five malls and office buildings in China worth $600 million, totalling 254,000 sq m of space. It also has minority stakes in six Tesco malls in China, with over 200,000 sq m of space.
It was the profits from the sale of properties, rather than retail, that explain his hefty pay package. And of his near $9 million, only 12 per cent was salary; the rest was bonus.
Mr Ong said Metro still runs on traditional Chinese family business lines where 'bonuses are paid only when profits are made and money is received'.
The proceeds from selling Metro's stakes in four properties, two in China and two in Penang, were received only during the last financial year.
In comparison, his 2009 pay was only $2.9 million. Metro's pre-tax profit rose to $115 million but this was mostly due to unrealised revaluation gains on properties. These were unrealised profits and did not make it to Mr Ong's bonus.
So does he take a pay cut if the properties do not make money? 'We have never been in a forced sale position. If we do sell, it's because we have a good offer and the project is matured,' he replied.
Just as he is taking home a bumper bonus, Metro investors are also getting a one-for-five bonus issue and a five cent dividend payout which works out to a 44.6 per cent payout rate.
Metro's under-the-radar transformation into a property player has been almost two decades in the making.
Its first foray into China is also the jewel in its crown - Metro City Shanghai, in which it has a 60 per cent stake. The centre in Xujiahui has nine levels of retail space and is linked to an underground railway. Occupancy is close to 100 per cent.
The deal was secured in 1993 and was Mr Ong's bid at resurrecting plans to expand in China that had been put aside after the stock market crash in 1987.
'It was luck and fate,' Mr Ong said, about the Xujiahui area which was then undeveloped. He joked that he did not even get an official feasibility study but trusted his instincts.
He credits his ability to spot projects and his retail acumen to his mentor, an 80-year-old British architect he worked with in the 1970s, who taught him about designing stores and identifying projects.
Mr Ong learnt that good design is 'like blood flow in a building, how visitors are able to walk up and down floors'.
But Metro has had setbacks. When a similar prime site was up for grabs in Beijing in the mid-1990s, the project fell through after a partner reneged on the deal. 'It is important to find the right partner,' said Mr Ong.
Even though Metro is a relatively small kid on the block in China, its early mover advantage and retail and design background have given it an upper hand when seeking joint venture partners.
But securing partners is only part of the process. Mr Ong spends a lot of time in China giving 'face' to his business associates and he also ensures that he leaves something on the table for them. 'Don't squeeze people until the bone, there will be no blood left,' he advised.
While many investors in China prefer to work with non-Chinese or people from their own countries, Mr Ong relies on the Chinese as he says they work much harder than Singaporeans.
He recalled one expatriate he hired who was a dead loss: 'His salary ate up all my profit.
'We should groom the Chinese instead.'
While Metro has clearly set its sights on China, it is open to expanding in Singapore if anything interesting arises.
'China is a very big market for retail, but it is also crowded. You must have dominance, something like 400,000 sq ft, a super-duper big store. That is too expensive for us.'
That is why Metro has chosen the route of buying strategic stakes in properties or partnering with others.
At the end of the day, retail and property are interlinked for Mr Ong.
To enhance a customer's experience, 'you need to understand how the customer is feeling, how they live and this is how you design a property'.
sushyan@sph.com.sg

[dydx]

Just checked my bank account a noted a nice credit from Metro Holdings' total $0.03/share Final+Special dividends for FY11 (ended 31Mar11). Feeling great!

Bearing in mind the group is flushed with cash to an obsene degree! - my own estimate: based on the latest 30Jun11 B/S and after adjusting for the conversion of warrants as announced todate, the 1-for-5 bonus issue concluded in Jul11, and payment of the total $0.03/share Final+Special dividends, is a latest total nett cash/near cash reserve balance of approx. $497.0m, equivalent to approx. $0.605/share, based on the latest (as at 31Aug11) 822.14m outstanding issued shares - I just hope that Metro Holdings will again pay out another nice Interim dividend for FY12 (last FY11: $0.02/share, paid in Dec10) in coming Dec11. Wishful thinking?

[pianist]

Ngee Ann Development Pte Ltd today bought 683,000 shares

[ngcheeki]

Ngee Ann Development Pte Ltd has been buying share of Metro Holdings since 14/9/2011. The amount of shares has increased from 75,637,056 shares to 79,617,056 shares or from 9.344% to 9.6088%.

See the following announcement for more information.

http://info.sgx.com/webcorannc.nsf/Annou...endocument

http://info.sgx.com/webcorannc.nsf/Annou...endocument

[buddy]

Hi

Has anyone done any update on this one.

[greengiraffe]

The analyst Goh Han Peng has been following Metro since the days in Kim Eng and only recently re-initiate coverage at DMG

20 January 2012
See important disclosures at the end of this publication 3
DMG Research
analYSING THE NEWS
The news: From retail to property. Metro was founded in1957 with its roots in retail. In the early
years, the business flourished and Metro became a household name in the local department store
scene. In the 1990s, the group diversified into property development as the retail landscape in
Singapore gets increasingly competitive. The group was one of the early investors in China’s real
estate market, recognizing the potential of the sector as the country started to open up. It has
since built up a portfolio of prime commercial properties in tier-1 cities in Shanghai, Beijing and
Guangzhou, as well as a number of property ventures in tier-2 and tier-3 cities. Today, the group’s
core businesses are in property and retail. However, the bulk of the group’s assets are deployed in
China, with focus on prime office and retail properties. Property contributes ~ 90% of operating
profits, with the balance from its retail operations in Singapore and Indonesia. Key properties that
the group owned include Metro City and EC Mall in Beijing, Metro City and Metro Tower in
Shanghai and GIE Tower in Guangzhou.
Proven track record in property investments. Leveraging on the group’s retail experience, deal
structuring expertise and partnerships with established players, Metro has built up an impressive
track record as a mall operator and investor in China. To date, all its property ventures have been
profitable, with divestment gains ranging from 5-25% premium over book value. Over the past five
years, shareholders’ equity compounded at a CAGR of 9%. Additionally, shareholders were
rewarded with special dividend payouts upon successful asset sales. This track record was
achieved without the use of excessive leverage, and for most of the time, the group was in a net
cash position, able to take advantage of dysfunctional markets to invest opportunistically.
Unlocking further value through asset sale. In April last year, the group announced that it has
placed its 50% stake in Metro City Beijing, a retail mall with NLA of over a million sqft, for sale with
a price tag of RMB 1.25b, a 50% premium over its latest valuation. A buyer has been shortlisted
and the deal is currently under-going due diligence. Should the deal go through, Metro will be able
to book a pretax profit of S$87.4m. We estimate this will lift book NAV by 9 cents/share.
Our thoughts: Trading at 45% discount to RNAV. Metro’s assets comprise 1) a China-based
property portfolio worth $683m; 2) property-related investments with a market value of $173m; 3)
an established retail business conservatively valued at $40m; and 4) net cash of some S$300m.
This gives rise to a RNAV of $1.02b, or $1.23/share, after netting out liabilities. At current price, the
stock is trading at a steep discount of 45% to RNAV, with 36 cts/share in cash. Backing out its
cash, the stock trades at a wider 65% discount to RNAV. Applying a discount of 30% to RNAV, we
have a target price of $0.86. With 29% potential upside, the stock is a BUY. Our valuation has not
taken into account any potential gain from the sale of Metro City Beijing.

[buddy]

Looks cheap if you value cash & liquid investments at 1x book & market price.

Vested.

[greengiraffe]

Has been the case for years. Likely to stay cheap unless there is a more definitive dividend policy on top of the special dividends when there is a sale of a major assets.

[Stocker]

This is another value-trap counterlike Har Par, UE, Lion and many others.