BUY - Emperor International (163.HK)

BUY - Emperor International (163.HK)

 

買入 - 英皇國際 (163.HK)

 

You may refer to my old posts for more details about Emperor International.  The company will announce 1H'FY2011 financial results tomorrow (Wednesday, Nov 24th 2010).  What I like are:

 

1) Stellar 1H'FY2011 results expected:  Strong contribution from rental properties; realized HK$960MM proceeds from The One and HK$460MM from The Java projects per news reports.  The stock has a history of surging immediately after good result announcements.

 

2) Chairman buying:  Chairman has 71.6% shareholding now and has been buying more in past 12 months at HK$1.65-1.85 range.  First, it shows his confidence, and second, it takes away free-floating volume in the market (and also much of the free float is with the institutional shareholders), so when demand for the stock comes, due to the relatively stringent supply, there will be strong upward pressure on price.

 

3) Discount to NAV:  Company has a NAV of $4.00-4.50, so current price represents ~0.4x P/NAV, which is attractive.

 

4) Strong pipeline:  Lot of project coming online FY'2011-2014 so this can be a longer-term hold as well.

 

5) Good dividend yields:  Company has a history of paying around 5% yield so this can be a longer-term hold if you want.

 

The company's three main businesses - a) retail property renting, b) property development and c) hotels - are all going to do well this year. 

 

a) HK$340MM rental revenue in FY'2010, and I'm guessing FY'2011 will be HK$360-380MM.  EBIT margin ~90% or ~HK$320-340MM.

 

b) Already pre-sold part of The One and The Java for HK$1420MM for 1H'FY2011.  Margins should be pretty high because they bought their land many years ago and they are selling those apartments at HK$10000+/sqft.  EBIT margin ~40%, or ~HK$560MM.  Should be more if continue to sell in 2H'FY2011.

 

c) HK$680MM hotel revenue in FY'2010 (for Macau + HK... they run a casino hotel in Macau and we all know how good business there has been in the past half year), and I'm guessing FY'2011 will be HK$750-800MM due to higher ASP and higher occupancy %.  EBIT margin ~30%, or ~HK$220-230MM.

 

So total EBIT for FY'2011 would be ~HK$1.1b+... less ~HK$120MM in interest, less ~HK$160MM in tax, so ~HK$800MM in profits for FY'2011.  So current year P/E should be around ~7x, which is very reasonable.

 

In case you are wondering, no I am not worried about property prices coming down because fundamentally, a) demand > supply, b) low interest rates and will stay low for awhile, c) strong balance sheets of developers and their higher COGS due to land, labor, steel and cement so they won't sell cheap, and d) influx of hot money from China (esp. with RMB appreciating against HKD).  Property prices could flatten but are not likely fall significantly in the near-term.

 

- Blogmaster

 

永恒策略 (764.HK)

One extremely speculative idea:  Buy 永恒策略 (764.HK) at $0.38.

• Core businesses are provision of management services to casinos in Macau and property development.
• HK$644MM in cash and HK$55MM in debt.
• HK1,098MM in Tangible Book Value vs. HK$87MM in market cap currently (if you look at Yahoo Finance or Google Finance, you'll see market cap is HK$418MM but that's not the right figure because the company just announced a 1-for-3 share subscription for existing shareholders, and HK$418MM market cap reflects the theoretical market cap after the new share issuance assuming that everybody exercised their rights.  So for now, the proper Price-to-Tangible Book ratio should be calculated with HK$1,098MM and HK$87MM, and should be only 0.1x).
• HK$0.03 per share in interim dividend (ex-dividend date is Oct 15 and payable date is Nov 1 so you can still buy now and enjoy the dividends), so 8% dividend yield with just interim dividend.  If the company pays out another HK$0.03, then annual dividend yield would be 16%!  The company should have the ability (though not sure about the management's willingness) to do that, given that large pile of cash sitting on the balance sheet, assuming that their accounts are not fictitious.

Though you should note that this stock is considered by some to be a 莊家股.  There's limited visibility on the intent of the management, and how business will do going forward.  My recommendation here is not based on value investment philosophy but that of a speculative one.  So I would only suggest this stock to those people who are speculative in their investment style and are prepared to lose money.

 

REITERATE BUY on CSI Properties (資本策略) 497.HK @ $0.18

REITERATE BUY on CSI Properties (資本策略) 497.HK @ $0.18 

• NAV per share is around $0.65 so current price represents a 70%+ discount.
• Property market in HK is bullish and should continue to remain so in the next 12-18 months due to a) low interest rates, b) low supply and c) influx of hot money from Mainland and abroad, and so in theory, the NAV of CSI Properties' portfolio should continue to increase.
• CSI Properties has engaged agents to solicit offers for its AXA Centre(worth $2.8-3.0 billion at market price vs. $1.44 billion cost at book).  If the sale happens, there will be a huge gain of more than $1.3 billion.
• CSI Properties is also planning to start selling its other property project(The Amber @ 45 Blue Pool Road, Happy Valley) at the end of this year.
• I have visited many of their properties sites (AXA Centre, Project @ Hoi Ping Road, Project @ Hankow Road), they are in very good locations.  Properties are about location, location and location, right?
• The Company announced a dividend of 5 cents for last fiscal year, which give the stock a 3% dividend yield.  This gives the stock a baseline for valuation, and it's unlikely that share price will go much below current level.
• The stock has been a serious laggard this year.  This stock doesn't fall into the radar screens of that many stock analysts because of its size.  Stock price would benefit from more people paying more attention to this stock.  The sale of AXA Centre and other projects should raise this company's profile.  You can see this same effect happening to Emperor's stock price when it started to sell 維壹 and The JAVA).
• Overall, I think the stock is undervalued and I'm sure there are others out there who feel the same.  The question then becomes when stock price will converge to its fundamental value (which I believe is ~$0.35).  The stock needs a spark to touch it off.  The best one would be selling AXA Centre & paying a huge special dividend.  The latter may or may not happen, but all in all, I feel this is a very good risk-return trade.

Xinao Gas (2688.HK)

Sorry that I haven't written for months.  I will try to be a bit more diligent and at least post an idea or two every month.

HERE'S THE LATEST IDEA:  Recommend "Buy" on Xinao Gas (2688.HK)

+ China's energy consumption will continue to grow in the foreseeable future

+ Natural gas is increasingly used instead of coal and this trend will continue in the foreseeable future

+ PRC gov't is incentivized to see the sector develop due to its strategic importance

+ Sector has high barrier to entry, being a) relationship with upstream gas providers such as PetroChina, b) capex, c) ability to obtain license from gov't on gas projects, among others

+ Xinao Gas is a leading player that has demonstrated ability to grow revenue and achieve decent margins in the past 10 years

+ Earnings is projected to grow by 20-25% CAGR from 2010 to 2012

+ Valuation is attractive at 17x P/E (based on 2010 analyst consensus earnings estimate), representing 20-30% discount to peers

+ Recent price weakness was due to alleged fraud but there has been no proof nor further development to the story, and price has started to recover

+ Morgan Stanley had reported recently that Xinao Gas may announce 6-7 new gas projects in the next few weeks

+ A peer company, China Gas, will report its earnings this week and the results should be very favorable, which reflect that sector fundamentals is good

Target price is $24/share (vs. $18.3 now), representing 30% upside potential.  But do your own homework before buying.  Here are some analyst reports that you can download.

MS Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyMjg5OGNjZmQtYjU3MS00MjQ0LTk1NTQtZjcyNTgzMDlkOGRk&hl=en


Citi Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyM2Y2YWRiN2QtNDgzNC00MTIxLTkwNDItOTg1YTljNmY4ZTc1&hl=en


CPY Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyZDg1YTdlZDgtZjM5Zi00NDY5LTg0ZGItMTMxY2IyODFhYjI1&hl=en


ML Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyMzYxMjk0MzYtZWIyNy00OTIwLWI0ODItMjI1ZGFhMzBjY2I3&hl=en


GS Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyY2ZmMmU3MDktNTVlZi00NjA0LWI5OWQtYzhlODU3ZjZmMjQw&hl=en

Dream Int'l (1126)

2009 results were in-line with my expectation.  The company's CFO said before that he will consider paying out one-third of the company's profits as dividends.  The EPS being HK$0.11/share, he's paying out HK$0.03/share (instead HK$0.04/share), which is why the market was disappointed and stock dropped 16% yesterday (and technically, some profit taking as well).  In my view, the stock is fairly priced at this HK$0.60-0.80/share level.  HK$0.60 represents a dividend yield of 5%, which is fair.  Judging from things that have been unfolding in the world, and well as the big order from Brazil, the company should be able to sustain its profitability at the current level for 2010.  So the question becomes - if you own the stock right now, what should you do?  Well, I think there's limited room for stock price appreciation as this point (and not a lot of downside risk either).  If you are ok sitting on a stock with 5% dividend yield and 5.5-6.0x P/E, then hold.  But if you have opportunities to earn a higher return, then you should consider selling down your position gradually.

I am current studying a 庄家股, which is something that I don't normally do.  But this one is interesting in that the company had a change of management in recent months.  There's a business unit that's generating good recurring income, and the company is sitting on a lot of cash and with little debt.  P/B ratio is 0.1x right now - there's so much value to be unlocked in the company, but obviously, the risk is if the company's new management continues to pillage the company, then the stock you buy will become worthless.  But if things go in the right way, then the stock could easily go up 4-5x.  Anyway, I'll share the idea upon more research.

中國網(8006)

如果下星期一(三月二十二日)中國網(8006)宣布派高股息, 股價將爆升.

一周兩件：資策博資產大升值(錢雋)自蘋果日報

資本策略（ 497）有靚爆鏡中期業績墊底，仲有大孖沙基金坐鎮，買資策，博資產大升值。資策剛公佈 2010年度（ 3月年結）中期業績，純利升咗 2.9倍到 3.97億銀。就當全年度都係呢個數額入賬，資策 PE都係得 4倍多少少。
又資策最新 NAV 0.4元，現價折讓 42%，已經有唔錯折讓墊底。仲要咁睇，在資策投資組合當中，持作出售物業總值高達 45億銀，真係係咁易加多 20%上去，資策已經可以額外增值 9億銀，每股增值 0.11元，幾乎係現價一半。
再講，資策股東當中，包括無寶不落嘅 Value Partners。 12月頭，有報道話著名基金鄧普頓講過，唔排除喺合理價位增持資策。一於跟基金上車，齋計資策反映上邊每股 NAV增值，股價就要翻近半番到 0.34元。

http://hk.apple.nextmedia.com/template/apple/art_main.php?iss_id=20100103&sec_id=15307&subsec_id=15326&art_id=13587536&cat_id=5886778&coln_id=6795051