2nd Chance Properties

[greengiraffe]

Too much conditions attached - one of which is the listing of a REIT. Who will be interested to buy such a REIT when recent REIT floats of a bigger size and much better quality have failed to attract much interests.

In addition, with 2nd Chance share price at almost full value post disposal, what can shareholders look forward to on top of return of cash. More critically, 2nd Chance need to provide shareholders with future direction that the company is heading given its properties is the main shining light of the entire group as its retail arm has got checkered history so far...

Vested
Odd Lots

The company will sell almost all of its properties to a property fund. The disposal is valued at S$175,376,412, with book value of S$134,773,500. It is a good price, IMO.

(not vested)
-------------------
RATIONALE FOR THE PROPOSED DISPOSAL

The Group entered the business of investing in properties in 1999-2000. It has held its properties as long term investments and earned steady rental income which became an increasing part of the Group’s revenue and profits over the years. The Group has reaped the benefits manifold over the past 14 years or so in the property investment business.
Going forward, the Board thinks that it is prudent to significantly reduce the Group’s exposure to its investments in properties. Additionally, the opportunity to sell the properties en masse is a rare one and provides the Group with an easier and more expedient means of disposing the Properties as compared to selling each Property individually.
The Proposed Disposal is also expected to unlock the equity tied up in real estate and the additional working capital derived from the proceeds of the Proposed Disposal can be redeployed into the operating business or to fund business expansion in the region, potentially generating a much higher return on equity. Please refer to paragraph 11 (Use of Proceeds) below for more details of the use of proceeds

Ref: http://infopub.sgx.com/FileOpen/SCPL_Ann...eID=273640

[changwk]

In the recent AGM in Dec, there were questions raised about selling the properties. There were concerns that the property market was cooling off and 2nd Chance properties will not appreciate further.

The reply from CEO was that they are looking to sell the properties when the time is right. Never did I expect it to be this quick.

I have full praise for Mr Salleh for his prudent business decision in this case. He is proven to be very savvy and cautious.

55% of the sale proceeds will fund other businesses. Question remains if it will generate good returns and what business they will fund.

6% of sale proceed will be distributed as dividend. Assuming $134mil as the sale proceed, 635 outstanding shares, shareholders can expect a div of approx 1.27c.

Safe to say that, shareholders can expect a bonus dividend.

[camelking]

probably time to get out of the counter.
Can't see anything else besides property in this counter. Maybe i am wrong...
It has been a good ride nevertheless.

vested

[CityFarmer]

The company might need to change its name again, from "2nd Chance Properties" back to "2nd Chance", after the disposal.

The core businesses after the disposal are the apparel retail both in Singapore and M'sia, and Gold retail in Singapore. The earning will reduce from few tenth of mil to probably less than 10 mil, without the rentals and fair value gains from properties

[GFG]

The company might need to change its name again, from "2nd Chance Properties" back to "2nd Chance", after the disposal.

The core businesses after the disposal are the apparel retail both in Singapore and M'sia, and Gold retail in Singapore. The earning will reduce from few tenth of mil to probably less than 10 mil, without the rentals and fair value gains from properties

Agree with the issue of what is the future for the company after the disposal, since the core businesses actually account for a much lower proportion of earnings compared to the properties.
Net profit was 57mil, but excluding non core earnings, its only ard 14mil.

In addition to the absence of fair value gains, the properties also account for 9.4% of the earnings in the form of rental income.
So earnings will likely take a big hit.

The key question is, how will management redeploy the capital? Property is toppish already and there are probably limited opportunities in that sector at this stage

[CityFarmer]

The company might need to change its name again, from "2nd Chance Properties" back to "2nd Chance", after the disposal.

The core businesses after the disposal are the apparel retail both in Singapore and M'sia, and Gold retail in Singapore. The earning will reduce from few tenth of mil to probably less than 10 mil, without the rentals and fair value gains from properties

Agree with the issue of what is the future for the company after the disposal, since the core businesses actually account for a much lower proportion of earnings compared to the properties.
Net profit was 57mil, but excluding non core earnings, its only ard 14mil.

In addition to the absence of fair value gains, the properties also account for 9.4% of the earnings in the form of rental income.
So earnings will likely take a big hit.

The key question is, how will management redeploy the capital? Property is toppish already and there are probably limited opportunities in that sector at this stage

It seems there were discrepancies on our numbers. Let me verify mine.

I refer to the latest full year result, the FY2013. I refer to page 16 of the report, which stated segmental profit. The sum of all segments exclude property was $9.85 mil. Bear in mind that it was the profit before interest, tax and unallocated expenses.

Ref: http://infopub.sgx.com/FileOpen/SCPL_Ful...eID=261827

The business of gold is not scalable, so unlikely the contributor for future growth. The only hope is the apparel business, which might has room to grow in M'sia, and may be to Indonesia. The apparel business is a very profitable business, with ROE of over 50% in FY2013.

(not vested)

[valuebuddies]

I wonder why the price is so resilient knowing that future yield will be bad. Is the company paying any special dividend or capital reduction from the proceeds?

[opmi]

I wonder why the price is so resilient knowing that future yield will be bad. Is the company paying any special dividend or capital reduction from the proceeds?

market not efficient one coz 99% dont read annual reports or corp anncs.
(fund mgrs included)

[GFG]

The company might need to change its name again, from "2nd Chance Properties" back to "2nd Chance", after the disposal.

The core businesses after the disposal are the apparel retail both in Singapore and M'sia, and Gold retail in Singapore. The earning will reduce from few tenth of mil to probably less than 10 mil, without the rentals and fair value gains from properties

Agree with the issue of what is the future for the company after the disposal, since the core businesses actually account for a much lower proportion of earnings compared to the properties.
Net profit was 57mil, but excluding non core earnings, its only ard 14mil.

In addition to the absence of fair value gains, the properties also account for 9.4% of the earnings in the form of rental income.
So earnings will likely take a big hit.

The key question is, how will management redeploy the capital? Property is toppish already and there are probably limited opportunities in that sector at this stage

It seems there were discrepancies on our numbers. Let's me verify mine.

I refer to the latest full year result, the FY2013. I refer to page 16 of the report, which stated segmental profit. The sum of all segments exclude property was $9.85 mil. Bear in mind that it was the profit before interest, tax and unallocated expenses.

Ref: http://infopub.sgx.com/FileOpen/SCPL_Ful...eID=261827

The business of gold is not scalable, so unlikely the contributor for future growth. The only hope is the apparel business, which might has room to grow in M'sia, and may be to Indonesia. The apparel business is a very profitable business, with ROE of over 50% in FY2013.

(not vested)

@ Cityfarmer:
The 9.85mil profit is excluding the ENTIRE property segment.
This particular property deal doesnt include selling off ALL of 2nd chance's property portfolio, although a substantial portion.

The recent announcement:
http://infopub.sgx.com/FileOpen/SCPL_Ann...eID=273640

Page5, point "b":
Profit due to properties in this transaction is 9.4% of the full yr net profit.

Also, just to note the 14.2mil profit excluding non core earnings, I am referring to excluding the fair value gains on properties. It STILL includes the rental income from the property.
This is a fairer way to assess as at that point in time, the company still owns the properties and has visibility in terms of earnings as the properties are leased. So rental income is considered core.
Fair value gains are unpredictable and cannot be considered as core earnings.
So the 14.2mil still includes property income, which is why it is higher than the 9.85mil indicated as net profit without property at all

[GFG]

The company might need to change its name again, from "2nd Chance Properties" back to "2nd Chance", after the disposal.

The core businesses after the disposal are the apparel retail both in Singapore and M'sia, and Gold retail in Singapore. The earning will reduce from few tenth of mil to probably less than 10 mil, without the rentals and fair value gains from properties

Also, just want to add that although the earnings will likely decrease in future, it wont be affected this year (FY14) due to the 1 off gain of about $40mil from the sale.

As for subsequent years, it really depends on how management uses the funds. From past record, the management has shown to be very prudent and wise in capital recycling, the risk is all the capital recycling involves properties, and there are likely to be limited opportunities in this sector.