UOB: Book value, dividend yield & prices to buy at.

2Q 2023 is a good quarter for dividends.

My war chest has begun filling up last month.

This is just in time too.

In recent blogs and videos I produced, I kept reminding myself that I would only be nibbling at UOB if its stock price fell to $28.

This is based on what I saw in the chart.

Immediate support is at around $28 a share.

If I were to be more exact, based on the weekly chart, it is at $27.80 a share which was the low formed on the 5th of June last year.

It also looked like the beginning of a neckline of a double bottom in the weekly chart.

In less than two weeks, the price of UOB's common stock has fallen from $30.15 to $28.22 a share.

That is a pretty big decline of almost 6.5%.

If I didn't have any exposure to UOB yet and if I have been waiting to get in, I would do so now.

However, I wouldn't go all in.

Fundamentally, at $27.80 to $28 a share, we would be paying around a 14% premium to the bank's book value and getting a dividend yield of around 4.8% at these prices.

Not too shabby.

I already have a significant investment in UOB but I would probably be nibbling too.

Nibbling and not gobbling.

I wouldn't go all in because bearish sentiments could be pervasive and this could drive the stock price lower to the next support at $26.90 to $27 a share.

Buying at these lower prices would mean paying a lower 10% premium to the bank's book value and also getting a higher 5% dividend yield.

If that support is ever tested, I would be buying much more then.

Technical analysis is about probabilities and never about certainty.

It tells us where the support and resistance levels are but it doesn't tell us if they would be tested or if they would hold.

This is my own plan and you should have your own plan too.

If AK can do it, so can you!

Recently published:

Why defensive investing is a good idea for most of us?

Reference:

Why increase exposure to UOB?

Daiwa House Logistics Trust: FX and TA.

The unit price of Daiwa House Logistics Trust has declined 32c or almost 40% in the last 6 months.

This is pretty dramatic.

Although I was unimpressed by Daiwa House Logistics Trust at its IPO and had some concerns, I did not expect its unit price to crash so hard.

At the end of June this year, when a reader asked if I was interested in Daiwa House Logistics Trust as its unit price had declined, I raised a new concern which was the persistent weakness in the Japanese Yen.

Unlike the ECB which is raising interest rate, the Japanese central bank seems determined to keep interest rate low which is depressing the value of the Japanese Yen.

In reply to the reader who asked if the lower unit price made Daiwa House Logistics Trust a BUY back in July, I said that if the Yen was stronger, then, the REIT would be undervalued.

Unfortunately, it wasn't.

I said:

"Since the Yen declined so much, then, a similar decline in unit price doesn't make it (i.e. the REIT) undervalued."

More recently, just a few days ago, the Yen hit a historic low against the U.S. Dollar.

With this recent development, Daiwa House Logistics Trust's unit price has sunk even lower.

I said in my last blog that China was getting very hard to read.

Japan isn't much easier either.

Why is the Japanese central bank so stubborn?

All investments are good investment at the right price.

Unfortunately, at the moment, I do not know if it is the right price but as long as the Japanese central bank is bent on their current course, Mr. Market doesn't know either.

I do not see any positive divergence in the chart as MACD and RSI decline in tandem with the unit price.

I don't have an interest in Daiwa House Logistics Trust.

Just a quick blog sharing my response to a query from someone I know.

Daiwa House Logistics Trust was priced too dearly at IPO and we now have a persistently weakening Yen thrown into the mix.

On hindsight, it might have been a blessing in disguise that Saizen REIT, Croesus Retail Trust and Accordia Golf Trust were forcibly removed from my portfolio.

Recently published:
CLCT: Staying defensive and Chinese banks?

Reference:
Daiwa House Logistics Trust: Good or not?

Wilmar was $7.11 a share and DBS, OCBC and UOB?

This blog is in response to questions by readers, csky and linus.

On Wilmar, DBS, OCBC and UOB:

That price target of $5 for Wilmar which I suggested in November 2019 is outdated as Wilmar's chart pattern was damaged by the price action inflicted by the COVID-19 pandemic.

The chart has morphed since then.

For readers who don't know what we are talking about, see:

Wilmar: Target reacquired.

Wilmar's chart is showing very strong upward momentum right now.

RSI, a momentum oscillator, shows that Wilmar is overbought right now but it could stay overbought for some time.

This is because there isn't any negative divergence in the MACD which is another momentum oscillator.

As the stock price moves higher, the MACD moves higher and this positive momentum suggests price could go higher.

Compared to this, the charts of the three local banks show negative divergence.

Their higher highs in stock prices have been accompanied by lower highs in the MACD.

Softness in the local banks' stock prices is to be expected.

We could see them retreating to test immediate supports.

However, Wilmar's stock price looks like it could go higher.

How much higher?

I don't really do this anymore but I will stick my neck out this time.

You probably remember this blog from 2017:

Accumulating Wilmar on price weakness.

In that blog post, I noted that when Mr. Market was feeling very bullish about Wilmar's prospects (like now), Wilmar's stock traded at a huge premium to its NAV.

It was a really huge premium.

Today, Wilmar's NAV is significantly higher than it was in 2010.

Based on this observation, it is probably not irrational to think that Wilmar's stock price could go higher than $7.11 we saw so many years ago in January 2010.

Having said this, there is nothing wrong with taking profit.

So, selling some to lock in some gains is probably not a bad idea.

Trading around a core position?

Sounds familiar.

Buy more, sell some or hold?

You decide.

I anyhow talking to myself only hor.

Investment in SPH is larger now.

Back in early 2017, I blogged about my decision to substantially reduce my exposure to SPH, an old timer blue chip investment in my portfolio.

However, I still retain till this day my investment in SPH made during the Global Financial Crisis more than 10 years ago.

In early 2017, the decision to reduce my exposure to SPH, selling my later investment in the business, was based on the accelerated disruption of its print media business.

I knew of the disruption and was expecting a gradual decline.

Unfortunately and also shockingly, it happened a lot faster than I thought it would.

Then, more recently, SPH's stock price crashed dramatically due to the crisis caused by the COVID-19 pandemic but failed to recover with the broader market.

It reminds me of a Chinese saying:

病來如山倒.

Unfortunately, SPH's print media business is a shadow of its former self today.

However, is this enough of a reason for such an enduring sickness in its stock price?




Back in the day when AK and Facebook were still friends, I had discussions with some readers on what SPH would be worth.

If we thought that the media business might be worth nothing one day, then, we could value SPH based only on its property investments.

Back then, some said SPH stood for "Singapore Properties Holdings."

SPH has many property investments and probably the most prominent to many people is its big stake in SPH REIT.

Unfortunately, SPH REIT suffered from disruption as well when the COVID-19 pandemic hit.

SPH is terribly unlucky.

It is reasonable to expect that tourists visiting Singapore will not be returning to the pre COVID-19 numbers anytime soon.

It could take a year or two or more.

So, although not hit as hard as hospitality, it is a reasonable assumption that SPH REIT's crown jewel of a mall along Orchard Road, The Paragon, will continue to suffer.

After all, The Paragon depends to a large degree on patronage by tourists.




Still, since SPH's NAV per share is almost all made up of its property investments today, buying at a big discount to this should give some margin of safety.

Of course, like I said before, if the COVID-19 pandemic stays with us for a longer time, we could see defaults becoming more common.

During the Global Financial Crisis, around the world, we saw massive devaluation of properties, for example, and a downward revaluation of 20% to even 30% was pretty common.

If we were to assume a massive revaluation of SPH's property assets to distressed levels, knocking off 25%, we get about $1.50 NAV per share.

So, I believe that, fundamentally, any price below $1.50 a share should give some margin of safety, all else being equal.

The lower the price, the bigger the margin of safety.




Of course, investors for income should also be interested in SPH's dividends.

SPH slashed dividends drastically to conserve cash because of the COVID-19 pandemic.

Prior to the COVID-19 crisis, SPH recorded an earnings per share (EPS) of 13c.

SPH also paid an 11c dividend per share (DPS).

With these numbers, at $1.35 a share (which was the price on 11 June 20 when I was asked about SPH as an investment by a relative), if the pandemic did not happen, it would be quite a straightforward buy.




Now, as COVID-19 lingers, there is uncertainty over the future of SPH's property investments including its student hostels in the UK.

It is fair to say that there is uncertainty too over its ongoing residential property development on a plot of land in Woodleigh in Singapore which they might have paid too high a price for.

Of course, as the local property market has remained rather buoyant in the face of the ongoing COVID-19 crisis, Woodleigh Residences could still do well for SPH and their Japanese partner, Kajima Corporation.

I do like the development's location and the fact that it is integrated with a shopping mall and MRT station on the purple line.

This is not an advertisement but if you are curious and want to take a look, here is the link:

https://woodleighresidencesofficial.com/

Mr. Market just doesn't like uncertainty.

Even so, SPH REIT's unit price has recovered from its lows while SPH's stock price has only recently formed a new low.

Now, for a bit of speculation again.

SPH REIT's DPU during normal times was around 5.5c.

Is it conceivable for SPH to pay, say, an 8.0c DPS when normal times return?

Why do I ask this question?

If an investment in SPH is able to give a dividend yield that is similar to or higher than the distribution yield offered by SPH REIT, I would rather invest in SPH instead of SPH REIT.

This is especially when Mr. Market is offering a selling price now that has discounted SPH's media business and more.

Then, any better performance by the media business however unlikely would simply be a bonus.




So, was I thinking of increasing my investment in SPH at $1.35 a share?

No.

Why?

Looking at the charts then, SPH's downtrend was stark.

The 50 days moving average was still on a steep decline and it was providing a strong resistance.

Too much dust and I could catch a falling knife.

So, I decided to wait.

Give it more time and see what happens.

I remember having a K.I.V. file in my army days and that was where I kept SPH, I guess.

That decision turned out to be quite fortunate.

What about now?

The air is still dusty and I could still catch a falling knife. 

However, the knife is probably a smaller one and might not be as sharp.

What does this mean?

It means that if this is a mistake, it should be a less costly one.

Yes, to be quite honest, this is all still slightly speculative.

So, I am crossing fingers and maybe toes as my investment in SPH is a little larger now.

Related posts:

1. Financially free and Facebook free.
2. Sizing my investment in SPH.

AIMS APAC REIT investment is larger now.

When I blogged about AIMS APAC REIT (AA REIT), formerly AIMS AMP Capital Industrial REIT, last month in April, I said:

"I have not done anything to my investment in AIMS APAC REIT for many years."

Well, I can't say that now because I just added to my investment in AA REIT.

I spent a few hours in the last few days reading, crunching some numbers and looking at the chart before deciding to buy some.

The dust seems to have settled for AA REIT at least for now.

Volatility has reduced tremendously and the unit price seems to have found a floor at about $1.15 a unit.

Looking at the chart, the rising 20 days moving average (20d MA) provides immediate support at $1.14 a unit.

However, the 50 days moving average (50d MA) is still declining and is currently at about $1.16 a unit.





The 50d MA has been providing resistance which has kept a lid on the unit price.

It is the proverbial tug of war between the bulls and the bears.

One side is unwilling to pay a higher price while the other side is unwilling to sell at a lower price.

The result is a reduction in price volatility and we see some kind of an equilibrium or stalemate as neither party is able to claim victory.

The rising 20d MA and the declining 50d MA are just about to form a bullish crossover, a golden cross, which the textbooks would say is a bullish signal.

The way things look now, the golden cross might happen in the next two or three sessions but, of course, if AA REIT's unit price suddenly plunges, it might not happen.

Of course, I always say there is no certainty in such things, only probability.

I am inclined to think that, at the moment, the only certainty we have is that things are looking relatively more settled now.

Any unwinding of such a situation could see unit price move either way and sometimes quite violently too.

Which direction?

Your guess is as good as mine.






Now, a bit of FA to provide some padding for TA is in order.

At $1.15 a unit and a DPU of 10 cents, we are looking at a distribution yield of about 8.7% which is a big increase over a distribution yield of about 6.9% when AA REIT was trading at about $1.45 a unit before the crash caused by the COVID-19 crisis.

The distribution yield looks relatively attractive but how realistic is it?

I always say that AA REIT is one of the better run industrial properties REITs in Singapore and I still think it is the case.

Of course, no matter how well run a business is, if it is up against an insurmountable external crisis, it is still toast which was why I kept saying it was better to err on the side of caution and wait for the dust to settle before deciding whether to buy more.

Very early into the crisis when the air was very dusty and the visibility was very poor, a friend decided to buy shares of SIA when it fell to $8 a share because he thought the blue chip was already very cheap at that price.

That blue chip is now a blue black chip.

Together with Temasek Holdings, my friend is performing National Service as he chips in to save the blue chip.

He is coughing (probably because of all the dust he inhaled) up more money to keep SIA alive while he has to live with the very real possibility of getting zero income from the investment for the next many years.






Anyway, back to AA REIT.

With gearing level at 35% and an interest cover ratio of more than 5x, AA REIT will probably be able to weather this storm pretty well now that we have a better idea how the COVID-19 situation might evolve and also how we could keep it better under control until a safe and effective vaccine becomes available to the world.

Of course, to be sure, there is always the possibility things could go awry.

In my blog on my largest investments in REITs last month, I said that if the crisis were to drag on for much longer, then, we could see tenants defaulting on rents.

For sure, it is possible that we could see a 10% or even a 20% reduction in AA REIT's income if the bad situation the world is in now were to worsen.

So, trading at $1.15 a unit which is about a 20% reduction from $1.45 a unit before the crash shows that Mr. Market is cognizant of the risks AA REIT must face.

Talking about this has a mildly speculative flavor, of course, but I remind myself not to be overly optimistic thinking that 8.7% yield is a definite thing as I could be setting myself up for disappointment.

We should be prepared for the possibility of bad news from AA REIT when they release results and maybe provide guidance next week.

Don't throw in everything including the kitchen sink.

I don't know about you but I need my sink in the kitchen.






While we are on the subject of speculation, it is also interesting to note that ESR Cayman and ESR HK have both been increasing their investments in AA REIT.

Their most recent purchase happened earlier this year in March and that was worth more than $2 million, if I remember correctly.

Of course, there has been talk about ESR harboring thoughts of a takeover of AA REIT for some time now.

Although I hope it isn't the case and it doesn't happen, it is a definite possibility.

If you are interested in this possibility, I blogged about it initially in 2018:

2Q 2018 passive income from S-REITs.

At that time, DBS said AA REIT "could be a target for takeover and suggested a target price of $1.55 to $1.65 per unit."

More recently, there were articles in The Business Times (November 2019):

ESR Cayman Ltd (ESR) acquired 26,827,400 units in AIMS APAC Reit (AA Reit) for a consideration of S$37,290,086 at S$1.39 per unit.

and also The EDGE (December 2019):

3 potential S-REIT mergers to watch out for.






Previously, when AA REIT's unit price was averaging $1.45 a unit which was a premium to its NAV, a takeover might have been seen as too demanding or too pricey.

With unit price now at $1.15 a unit which is a discount to its NAV, a takeover is probably more palatable and also more feasible.

To me, ESR accumulating units at $1.30+ a unit continually and in pretty large chunks up until middle of March this year tells me what ESR was thinking about AA REIT as a value for money investment at that price level.

What will their next move be?

You tell me.

Yes, I know.

Bad AK! Bad AK!

I will stop here.

Time for me to move from this world of imagination to another world of imagination.

Till my next blog, be socially responsible and do the right things.

We are #SGUnited.

You might be interested in the following video on AA REIT's portfolio of properties:





Related post:
Largest REIT investments updated.

Chatting and charting in "Evening with AK and friends".

I hope that everyone had fun at "Evening with AK and friends" and, of course, I hope it was helpful in one way or another.

"Evenings with AK and friends" are chit chat sessions of epic proportion and this was probably the largest ever session as we had almost 100% attendance (160 strong audience). It felt a bit crowded and very warm!

We chatted about stocks, CPF, insurance, real estate and dieting. Yes, dieting too. Basically, anything I have blogged about was fair game.




I was surprised that almost everyone stayed until 10 pm when we called it a night. So, I guess it must have been fun. Learn nothing, never mind. Must at least be fun. Right?

A few readers made me work overtime. You know who you are. Ahem.

I also spent quite a bit of time talking about Technical Analysis (TA) this time. Here is the blog with the recommended books:
http://singaporeanstocksinvestor.blogspot.sg/2012/12/recommended-books-for-fa-and-ta.html

More recommended books in the right sidebar of my blog under "Food for thought".

A recent example of TA in my blog:
http://singaporeanstocksinvestor.blogspot.sg/2017/09/technical-analysis-of-comfortdelgro.html




I am not trading ComfortDelgro per se but the chart is helpful in showing where the supports are.

If we want to make some money trading stocks, we should learn TA. If we don't know TA, we are fighting blind.

Having said this, remember that TA is not the Holy Grail although some might think it is. 

TA gives us a glimpse into Mr. Market's psychology. 

TA is about probability and not certainty.

A stock can stay oversold or overbought for a long time. Refer to MFI.

A negative or positive divergence can have longevity. Refer to price, volume and MACD.

Always pay attention to the trend.

Fibonacci lines show us the support and resistance but not if they will hold or break. Look to the golden ratios 38.2%, 50% and 61.8%.





I joked that talking too much about TA diluted my reputation as an investor for income. Some might remember that I have revealed in my blog that I made a bit of money as a trader before. So, it really shouldn't be surprising.

Trading was helpful in growing my capital.

Refer to point number 5 in this blog:
http://singaporeanstocksinvestor.blogspot.sg/2015/06/how-did-ak-create-6-digits-annual.html





Finally, remember, that not everyone has the temperament to be a trader.  I feel that it is fair that I say this again after sharing about TA and trading in this session.

TA and FA are useful but the most important knowledge is self knowledge. We have to know ourselves.

Related post:
When to buy, hold or sell?

Grew more daring and lost more than $100,000.

Reader:
Good afternoon AK.

I remembered vividly the first stock I bought in 2009, Golden Agriculture. I bought 20 lots at 41cents and sold them away at 47cents. I made a profit of more than 1k and I was delighted.

Subsequently, I bought/sold a lot more other counters which also gave me profit. I did contra trading too.

I was basically following my *husband blindly in buying and selling penny stocks which were recommended by him or his friends.






*he is a penny stock chaser till today, hence I always tell him he is contributing money to our government through SGX

As time went by, I became more daring in buying without preparing or having the money to pay when the trades were due for payment.

Not knowing even about basic TA, hence very often, I bought at the peak and got stuck. Greed is another reason as over the years, I should have a chance to sell away some of the stocks but I didn't.

To date, I have lost more than 100k and still holding on to a few stocks with losses that are too great to cut. (losses of more than 85%!)

ICI

AK:
Hi ICI,

There are many schools out there. I invest primarily for income. So, I have my own style.

We have to find out over time what works for us, what we are most comfortable with. Psychology is important too.

I will say don't be in a hurry to plonk money in the stock market. Learn as much as you can first.

Best wishes,
AK

一步一步來







If we wish to trade more than invest, we should pick up TA. See related post #3 below for some recommended books.

Now, do you remember what AK likes to do? Yes, AK likes to eat bread with ink slowly.

Related posts:
1. How to make recovering from losses easier?
2. Risks and rewards: Learn FA and TA.
3. Recommended books for FA and TA.

An incomplete analysis of OUE Limited (Updated).

UPDATED (4 Oct 17):

OUE Limited is more of an asset play to me. Just like Guocoland (read blog: here) and Tuan Sing (read blog: here), as an investment for income, it isn't very persuasive for now. 

For now?

For those who work in the CBD, they will know that the redevelopment of OUE Downtown into a mixed-use development has been completed.





Downtown Gallery and Oakwood Premier OUE Singapore started operations in May and June 2017 respectively.

Downtown Gallery has 150,000 sq ft of retail space while Oakwood Premier OUE Singapore has 268 serviced residences comprising studio, one-bedroom and two-bedroom units. 

Logically, we should see income contributions in 3Q 2017. Recurring income stream should strengthen.


The 462 units OUE Twin Peaks is mostly sold.

Latest NAV per share: $4.38.

I like that OUE Limited seems more interested in pursuing recurring income instead of having a heavy reliance on development properties.




----------------
I really enjoyed this email from a reader:

Hi AK,

I'm a long-time fan of your blog (around 5 years, I think!). I especially liked the back-of-the-envelope calculations you used to do when valuing stocks.

I read your post on OUE as an asset play a few years back but only got around to evaluating it myself last week over the long weekend. 

In OUE's latest financial report for 2Q 2015, it's NAV/share is reported to be $4.31. At the current price of $1.60, that's a pretty crazy 63% discount! But it immediately raises the question of whether reported net asset values can be trusted. 

So I decided to try and value the properties... Fortunately, OUE only has a few properties that haven't been divested to their REITs:

1. OUE Downtown - fair value S$1,477m

2. US Bank Tower - fair value US$530m

3. Marina Mandarin (30% stake) - fair value S$560m

4. OUE Twin Peaks - book value S$768.2m

OUE Downtown comprises 2 office towers, OUE Downtown 1 and 2, the first of which is being transformed to a mixed-use development. OUE Downtown 1 is having its low-mid zones converted to serviced suites and its podium converted to a shopping mall, while the upper levels, plus the entire OUE Downtown 2, will remain as office space. 

To value this building, I turned to URA's records of sale transactions for commercial properties over the past quarter (Jun-Sep 2016), looking for office buildings of roughly the same age and located in the same area (districts 1 and 2). I found transactions for office space in 3 buildings that looked relevant:

1.  International Plaza - S$1,626 psf

2. Shenton House - S$1,602 psf

3. People's Park Centre - S$1,296 psf

There were multiple transactions for International Plaza and People's Park Centre over this period, with the psf value increasing for higher floors, but since I wanted to value OUE Downtown conservatively I opted for the lowest psf values. Since OUE Downtown has a net lettable area of 867,000 sq ft, assuming it can be sold for the same S$1,296 psf as office space in People's Park Centre gives us a valuation of S$1.1 billion.

Going further back in time, in Nov 2015 the CPF Building, which is very close to OUE Downtown and which lease expires in the same year, was sold for S$1,697 psf of net lettable area. This gives me some confidence that my valuation is indeed conservative.

Obviously there are still some caveats with this valuation, I can think of at least 3:

1. OUE Downtown 1 is going to have retail and hotel components; these might be valued less than office space is, especially if the mall and the serviced suites are not successful.

2. OUE Downtown has about 50 years remaining on its lease, so depreciation each year henceforth is 2%.

3. There is significant supply of new premium office space coming online in 2017 and 2018 (e.g. Marina One, DUO Tower), which may depress valuations for older buildings like OUE Downtown.

For the US Bank Tower, I used pretty much the same approach. The US Bank Tower is a freehold Class A office building in downtown Los Angeles, so I looked for recent transactions for prime office buildings in the same area. Here I was able to find transactions for 3 entire buildings:

1. One Bunker Hill - US$300 psf, sold in 2015

2. 800 Wilshire Blvd - US$358 psf, sold in 2015

3. The Desmond - US$573 psf, sold in 2016

Again, I took the lowest psf value and multiplied it by the US Bank Tower's 1.44 million sq ft of net lettable area. This gave me a value of about US$430 million. 

Now if OUE did divest this building for this amount that wouldn't be a great deal for them, since they bought the building for about US$370m and spent US$50m renovating it - a total cost of US$420 million. But I believe they should be able to fetch a higher psf for the US Bank Tower, because:

1. It is an iconic building; when built in 1989, it was the tallest building in the whole of California (and is still the second tallest).

2. It is significantly newer than all 3 of the buildings listed above; The Desmond was built in 1916, One Bunker Hill in 1930 and 800 Wilshire Blvd in 1972. The US Bank Tower on the other hand was built in 1989.

Nevertheless there are also at least 2 caveats with 

this valuation:

1. Occupancy is still only 75%. This is an improvement from the 60% occupancy when OUE first purchased the building in 2013, but 25% vacancy is still quite a bit higher than that for Class A office buildings in LA overall, which is 15.6%. All 3 of the LA office buildings above had occupancy above 90% when they were sold. Then again, the 75% figure is for end-June 2016, which is when asset enhancement works had just completed, so it's possible that occupancy has already improved since then.

2. California is a seismically active region and although the US Bank Tower is supposedly designed to resist an earthquake measuring up to 8.3 on the Richter scale, obviously if the building is destroyed it will have no value.

With OUE Downtown and the US Bank Tower out of the way, that leaves us with the Marina Mandarin hotel and OUE Twin Peaks. 





I think these properties are less relevant to my investment thesis though. OUE does not have a controlling stake in Marina Mandarin (its effective interest is only 30%) and so it can't make the decision on whether or not to divest the hotel.

The Twin Peaks condo is more interesting. Popular opinion is that the prospect of paying extension charges if OUE is unable to finish selling all 426 units has been weighing on the share price. When I called an agent to inquire, I was told the following:

- Tower 2 of Twin Peaks is completely sold

- 50% of units in Tower 1 have been sold, 20% are under negotiation (including for the bulk sale of some floors) so only 30% are still available

- The developer has bought a few floors for himself (???) When I asked OUE's IR about this, I was assured that they had bought only a few units, but still.

There is an article in yesterday's Straits Times (13/9/2016) which states that half of a batch of 86 units at Tower 1 have been sold since the units were launched in July, so it does seem that sales have picked up. 

If OUE can maintain this sales momentum, I think there is a good chance that they will be able to avoid the extension charges that will kick in Feb 2017 if units are left unsold. That the company has reversed some of its previous impairment losses on Twin Peaks in its latest financial results is also a good sign. 

It's true that even if OUE manages to sell all Twin Peaks units the project may still be loss-making overall, but this also doesn't seem too important to my valuation since I am assuming that all the costs for the land and development costs have already been incurred and accounted for (please let me know if I'm wrong!).

If Twin Peaks and Marina Mandarin are not important to my valuation (as long as extension charges for Twin Peaks are avoided), that means I'm counting on the valuations of OUE Downtown and the US Bank Tower. I established earlier that I think conservative valuations of these properties are S$1.1b and US$430m  respectively. Assuming, again, a conservative exchange rate of 1.3 USD - 1 SGD, that adds up to S$1.1b + S$559m = S$1.66b.

What is OUE's current market cap? Each share trades at about $1.60 and there are close to 903m shares, so the market cap is about S$1.44b. 

In other words, the combined, (what I believe are) conservative valuations for OUE Downtown and the US Bank Tower, already exceeds what Mr. Market thinks the entire company is worth! 

That looks really compelling, especially since I haven't even taken into account the values of its stakes in OUE Commercial REIT and OUE Hospitality Trust, which are significant:

- 35% of OUE Hospitality Trust, which has a market cap of S$1.2b

- 65% of OUE Commercial REIT, which has a market cap of S$900m

-----------------------------

This fits in very nicely with what I said during the last "Evening with AK and friends".

I will add that if we look at OUE Limited as an asset play, we have to be very realistic about the time it might take to see value unlocked. It could be years before we see anything. 

So, we need to size our position conservatively as well unless we have money to burn and we need to be very patient.

Related posts:
1. OUE Limited: A nibble.
2. An incomplete analysis of Wing Tai.
3. OUE Limited: An asset play.

Used Hock Lian Seng as an example in August 2016. (Technical Analysis, Valuation and War Chest.)

I used Hock Lian Seng as an example to chat with this reader in August 2016. 

I wonder if he bought any before my next blog on Hock Lian Seng in February 2017. Don't scold me hor, I am just curious.

Blog in February 2017: 
Hock Lian Seng returns 100% and more.



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Reader:
may i ask which TA you are using? candlestick, moving average or ?

AK:
I try to keep it simple. Example:

http://singaporeanstocksinvestor.blogspot.sg/2014/12/hock-lian-seng-robust-order-book-at-3.html
Hock Lian Seng: Robust order book at a 3 year high.

I also try to spot divergences sometimes:

http://singaporeanstocksinvestor.blogspot.sg/2013/05/hock-lian-seng-buying-on-weakness.html
Hock Lian Seng: Buying on weakness.

Reader:
I read, sometime u can't time the market, so shld we enter at a price we still think it's undervalue or use ta to determine entry price?

AK:
We can never get the lowest price. If we did, we were lucky. 🙂

So, if FA tells us it is undervalued, we can nibble.

Keep the TA picture in mind if it tells us prices could go lower. Have a war chest ready, always.




Reader:
Am reading this, have the same dilemma on when to sell
http://singaporeanstocksinvestor.blogspot.sg/2015/05/should-i-sell-my-investment-to-lock-in.html?m=1
Should I sell my investment to lock in gains?
Currently my war chest is hovering 20% 😁

AK:
Gambatte!