GuocoLand

[Curiousparty]

Anyone has any views pls, especially on the bolded portion?


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Potential Restructuring Could Crystallise Value. With GuocoLand's share price trading at a P/NAV multiple of just 0.40x and ~4% yield, valuations are attractive. With a growing portfolio of commercial assets, the potential securitisation of GuocoLand’s income-producing portfolio or conversion into a “stapled security” could be a significant catalyst for GuocoLand's share price, with the potential upside ranging from 50% to 100%.

Guocoland - The Best Is Yet To Come (sginvestors.io)
https://sginvestors.io/analysts/research...2023-09-07

[weijian]

Hi CP,
I do not have any view but insiders might have some views. Their views are much better than sell-side analysts.

A minority posted a question to Capitaland Investment some time back and Guocoland was mentioned.
https://youtu.be/UXO4TY-ngmo?t=3065

You can hear the answer from CLI executives yourself (inclusive of the CFO's mangled look towards his colleague before answering the question). But of course, things are dynamic and could change in the next decade!

[CY09]

https://links.sgx.com/FileOpen/SGX-Conde...eID=817336

With the absence of a strong revaluation gain on its investment properties, Guocoland earnings have shown how much is largely due to recurring.

At DPS of 6 cents, it does seem manageable and about 100% payout ratio (netting off fair value gains). NAV of Guocoland is $3.90 but this is due to its investment assets.

In terms of development sales, it seems Guocoland has enough developments until end 2026 to recognise for revenue. However, the amount of residential sales is declining. My view i Guocoland is becoming like a commercial REIT which is leveraged, dishes out 6 cents dividend. But if development properties do draw out and it becomes valued like a REIT, i wonder what dividend yield will it be pegged at? A 5% Dividend seems low but it means there are some further downside based on its current share price.

[ghchua]

Hi CY09,

You have net off fair value gains to derive at 100% payout ratio. But why didn't you add back the allowance for foreseeable losses of $103.8 million in 2H FY24 on its China’s development properties? Because this is just a one off allowance for their future losses and its a non cash item. It shouldn't hit them immediately to affect their ability to pay out dividends.

[weijian]

https://links.sgx.com/FileOpen/SGX-Conde...eID=817336

With the absence of a strong revaluation gain on its investment properties, Guocoland earnings have shown how much is largely due to recurring.

At DPS of 6 cents, it does seem manageable and about 100% payout ratio (netting off fair value gains). NAV of Guocoland is $3.90 but this is due to its investment assets.

In terms of development sales, it seems Guocoland has enough developments until end 2026 to recognise for revenue. However, the amount of residential sales is declining. My view i Guocoland is becoming like a commercial REIT which is leveraged, dishes out 6 cents dividend. But if development properties do draw out and it becomes valued like a REIT, i wonder what dividend yield will it be pegged at? A 5% Dividend seems low but it means there are some further downside based on its current share price.

Hi CY09,

IMHO, Guocoland doesn't even whack like a REIT.

(1) Its gearing is ~80% and would have burst the REIT regulatory limit.

(2) It has tons of development projects on the line, which explains the "high gearing". In the ordinary course of events, it wouldn't be paying out at least 90% of earnings as dividends as it continues its development BU.

[weijian]

I don't follow Guocoland in detail but I am always interested in any Mgt's response in terms of capital allocation. I decided to take a quick look at the numbers based on AR25:

FY25 (in '000)
PATMI=107,050
Equity=4,339,992
Net debt=4,903,894
Net Interest costs = 200,046
ROIC=107,050/(4,339,992+4,903,894)=1.2%
Avg cost of debt = 200,046/4,903,894 = 4.1%

- If SBB is done at 0.5x NAV, it will mean earnings yield of 1.2% x 2 = 2.4%. The 2.4% number is not exactly accretive and hence much lower than the cost of equity (anything from mid to high single digits that we can assign). Any excess cash is probably better off paying off some debt that costs 4.1% on average. As of now, it seems SBB will only be accretive if the SBB buys back shares that will have high earnings in the future.

- A property developer may use bridging loans to secure land parcels/prepayments and when they start selling units, they will take deposits from the buyers to repay the earlier bridging loans. As construction progresses, the developer collects cash from the mortgage banks, and then pay their contractors accordingly. Therefore, if the developer is experienced and manages cashflow correctly, working capital is indeed low and when Guocoland Mgt says that "Property Development provides good return on equity", it is true. But besides the art of managing cashflow, the units need to sell well first so that working capital remains low, thereby giving good return of equity. Quick back of envelope calculation shows ~2bil worth of working capital (inventory + receivables - payables) that Guocoland holds on its BS for its development projects. Since it doesn't have segmental breakdown, I will just use the entire PATMI=107,050 and "ROE of property development" = 107,050/2bil ~5.3% ROE. So the bottomline is, just based on my simple calculations, development hasn't provide good return on equity based on FY25 results.

49TH ANNUAL GENERAL MEETING TO BE HELD ON 23 OCTOBER 2025 - RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS

Q4. Despite the recent recovery, GuocoLand’s share price is still trading at about half its latest net asset value (“NAV”) of S$3.90. Given the depressed valuation of its share price in the past year, why has the Company not conducted any share buy-back? Can anything be done to address the gap between the Company’s share price and NAV?

The Company’s share price is influenced by a range of external factors, some of which are beyond its control and hence may not immediately reflect the true value of its assets. The Group will consider the merits of share buy backs against reinvesting to grow the business. GuocoLand’s Management is focused on the Group’s twin-engine growth strategy. By growing both Property Development and Property Investment, the Group aims to provide a balanced earnings profile for its shareholders. Property Development provides good return on equity. Meanwhile, Property Investment provides steady, recurring cash flows and revenue, which complement the lumpy nature of Property Development. As the Group’s investment properties mature, it aims to increase the recurring income from rentals, which will contribute to dividends. The Group actively engages with the investment community and will continue to do so, to enable the market to appreciate the value of GuocoLand’s twin-engine growth strategy.

https://links.sgx.com/FileOpen/SGXAnnc-%...eID=864297