3 articles back, we mentioned that Golden Agri was on our radar for its darn cheap valuations as compared with their peers. On 9 October 2008, Money Mind on Channel News Asia featured an analyst from Royal Bank of Scotland who commented on a SELL on Palm Oil counters (think he also said palm oil prices have bottomed....then why sell?????Damn Bazaar!) but he mentioned that Golden Agri was a BUY due to its relative valuation. Today, our hot sexy "oracle" gave us the latest issue of THEEDGE magazine to read. In it, there was an article write-up on Indo Agri and a short little comparison on the players in the Agri field.( Reproduced here for your benefit) So what is the reason for this stock to be so undervalued relative to its peers. We decided to investigate and could only think of a possible reason, that investors were pricing in a cheaper stock due to the not so favourable history of its management. Read here here to find out more. Anyway, based on some simplistic technical analysis, this stock has been trading very heavily and their bolliger bands are narrowing, which could mean a possible larger price movement in the coming days.
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team
Fortune REIT is an interesting stock. In the realm of REITS listed in Singapore, it is one of the few ( maybe its the only one, we are not sure as we did not check every single REIT) which has current assets approximately equals to its current liabilities. If you have read our previous articles on REITS and about Fortune REIT, most of the REITS in Singapore have current assets very very very substantially lower than their current liabilities, which actually is quite normal given the well known fact that these entities borrow heavily to finance their operations. So let us relook at Fortune REIT , given that they just released their financial statements. Lets use some primary school maths on percentages, shall we?
TAKEN FROM THEIR SLIDES RELEASED ON NOV 08 ( ABOVE)
Firstly, at first glance, it looks impressive, doesn't it?Solid Operations, No Refinancing Needs, blah, blah,blah..all the marketing talk which actually makes us more determined to research the company actually. Circled in RED, it states that currently their portfolio of property has an occupancy of 94.4%, but let's look at their porfolio expiry profile below.
TAKEN FROM THEIR SLIDES RELEASED ON NOV 08(ABOVE)
It states that in the fourth quarter of 2008, 7.7 % of their occupied space is expiring. Let us assume that the 7.7% do not renew. That will leave us with (100%-7.7%) times stated current occupancy level of 94.4%, which gives us an occupancy level of 87.1% at end of this year. Let's look at 2009. As stated above,33.4% of their occupied space is expiring in 2009. Assuming that the 33.4% do not renew, this will give us an occupancy level of (100%-33.4%) times 87.1%, which turns out to be 58%! Imagine going to a shopping centre, say Suntec City where around 4-5 shops out of 10 shops are closed!
This is the worst case scenario of course. There might be new tenants coming in to take up the slack, some or even all of the tenants might actually renew, and we might even be wrong in our interpretation of "% of occupied space expiring" in their slides. But well, no definition from Fortune breeds speculation.....(Just added: We are not experts in shopping malls leasing, maybe its the industry practice, not perculiar to Fortune. But from a layman's perspective, given these times, its some food for thought!)
Anyway, we are pretty disappointed with the investor relations department of this company as they did not reply on our query on how they are going to mitigate this risky outflow of tenants. Why the following sentence if you are not going to reply ?
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team
So what is the reason for this stock to be so undervalued relative to its peers. We decided to investigate and could only think of a possible reason, that investors were pricing in a cheaper stock due to the not so favourable history of its management. Read here here to find out more.
