12 July 2012

Chip Eng Seng Update - July 2012

On 9 April 2012, Grange Properties issued further notices pursuant to the SPAs to Pearl Properties for payment of the total sum of S$10,177,886.77 inclusive of interest thereon in relation to units #15-03, #18-02, #20-02, #21-02, #22-01, #24-01, #24-02, #25-01, 26-02, and #27-02 (“the 10 Units”) within 21 days, failing which, the SPAs will be treated as annulled and Grange Properties will be entitled to regain possession of the 10 Units and exercise their rights under the SPAs.

On 24 April 2012, Pearl Properties made its 2nd application for an injunction in Summons No. 2013 of 2012/E against Grange Properties for an order, amongst others, to restrain Grange Properties  from exercising its rights under the SPAs (“Pearl Properties’ 2nd Injunction Application”).

The SPAs for the 10 Units will be treated as annulled on 8 July 2012, unless the outstanding  payments of the total sum of S$10,177,886.77, inclusive of late payment interest, are paid to Grange Properties or its solicitors by the end of 7 July 2012.

On 3 July 2012, Pearl Properties’ 2nd Injunction Application was heard before another High Court Judge. The Honourable Judge dismissed Pearl Properties’ 2nd Injunction Application with costs payable to Grange Properties.

Following the Court’s decision, the SPAs for the 10 Units will be treated as annulled on 8 July 2012, unless the outstanding payments of the total sum of S$10,177,886.77, inclusive of late payment interest, are paid to Grange Properties or its solicitors by the end of 7 July 2012.

Further announcement(s) will be made by Chip Eng Seng Corporation Ltd in relation to the
Suit when necessary.

Grange Properties is subsidiaries of CES, mainly in developing Grange Infinite project in the Orchard Road area. 

11 July 2012

Future Thomson MRT and Current Route from Singapore CBD to Johor Bahru

Extract from  http://en.wikipedia.org/wiki/Thomson_MRT_Line (updated as at 5/9/2012)

The Thomson Line (TSL) will be the sixth Mass Rapid Transit and the fourth fully automatic and driverless system line in Singapore. The whole line will be completely underground. It is now under final stages of the advance engineering study.[1] Opening in three phases, starting from 2019 onwards, Thomson Line will add greatly to the accessibility and connectivity of the current rail network, with interchanges to all other five MRT lines. It will also serve about 400,000 commuters daily.[2]

The line, which is 30 km (19 mi) long and consists of 22 stations, will run through the north-south corridor, starting in northern of Woodlands area, passing through the industrial estate of Sin Ming, down to the residential Thomson area and the shopping districts of Orchard and Marina Bay, before ending at Gardens by the Bay. Residents in the heartlands of Sembawang, Nee Soon, Ang Mo Kio, Bishan-Toa Payoh and Moulmein-Kallang will benefit from faster and more direct connections to the city. For its depot, it will be a 32 ha (79 acres) depot which will be located at Mandai, south of Woodlands.[3]

Figure: Republic Polytechnic - northern-most station will be built near here.

Due to various demands for Thomson Line, Thomson Line will be opening in 3 different phases which are, Phase 1 in 2019, Phase 2 in 2020 and Phase 3 in 2021.

Phase 1 (2019)

Phase 1 consists of Woodlands North, Woodlands and Woodlands South. This phase will affect passengers living in northern of Singapore which enhance accessibility and connectivity to CBD and downtown area. Instead of travelling using the only one line, North South Line, to southern of Singapore, the availability of Thomson Line will reduce travelling time taken up to 50%.

Phase 2 (2020)

Phase 2, comprises middle section of Thomson Line, namely Springleaf, Lentor, Mayflower, Sin Ming, Upper Thomson and Caldecott. An example quoted from a speech, stated that passengers living in Sin Ming travelling to Gardens by the Bay would save 25 min of travelling time from the current 65 min for the journey. Residents of the new developed Springleaf estate too will be welcomed by a new MRT station in the future. Passengers living in west of Ang Mo Kio or Thomson will also be able to experience savings in travel time when commuting around. As for Caldecott, it will become an interchange station with Thomson Line when opens in 2020 and will connect commuters to the orbital CCL, offering inter-suburban connectivity.[9]

Phase 3 (2021)

Phase 3 includes the final thirteen stations from Mount Pleasant to the terminus, Gardens by the Bay. Interchanging with the four current lines — North South Line (NSL), East West Line (EWL), North East Line (NEL), Circle Line (CCL) and the upcoming line, Downtown Line (DTL), Thomson Line will ease the burden of the high capacity usage of the current lines. Outram Park and Marina Bay stations will also provide excellent network access with the TSL connecting to the EWL and NEL at Outram Park, and the NSL and CCL at Marina Bay. [10]

MRT Terminals for Thomson Line. Source: Wikipedia as at 5/9/2012

I am not sure how long would it take for Johore to get ready with its RTS so that an integrated custom built at Singapore side and reduce the time spent on daily traveling. If this is completed, I believe the traveling time from Singapore CBD to Johor Bahru will be shorten by at least 30%

I tried out different routes from Singapore CBD area (Raffles Place) to Johor Bahru CIQ via public transport recently. Below are the summary of the routes after working hour (5PM)

Route 1: Raffles Place MRT - Bugis MRT (MRT - 6 mins) - Rochor Bus Terminal (Walk - 10 mins) - Singapore Custom (Bus no. CW2/SJE - 30 mins) - Johor Custom (Bus no. 160 / 170 / CW1 / CW2 / SJE / 950 - 20 mins) Total around 66 minutes if there is no traffic jam.

Route 2: Raffles Place MRT - Kranji MRT (MRT - 46 mins) - Singapore Custom (Bus no. 170 / CW2 - 15 mins) - Johor Custom (Bus no. 160 / 170 / CW1 / CW2 / SJE / 950 - 20 mins) - Total around 83 minutes if there is no traffic jam.

Route 3: Raffles Place MRT - Marsiling MRT (MRT - 43 mins) - Singapore Custom (Bus no. 856 opposite Marsiling MRT station - 10 mins) - Johor Custom (Bus no. 160 / 170 / CW1 / CW2 / SJE / 950 - 20 mins) - Total around 73 minutes if there is no traffic jam.

Assuming Thomson line is ready by 2018, it could cut down the traveling hour for MRT from 46 minutes to 30 minutes, and also shorten the time from SG custom to Johore custom. Hopefully by then we can reach Johor custom from Singapore CBD area within 1 hour.

09 July 2012

Bets on Orchard Parade

One of the recent stocks under the spot light is Orchard Parade, after they announced a proposed launch of Hospitality Trust, which they will inject numbers of properties under its name to this newly set up entity. The rationale given by the management was to estabilish hospitality management business as well as venture into healthcare sector which provides stable income stream as well as unlock YHS shares that the co. hold for 49.5% through its subsidiary.

I have just run through some research reports from various research houses and they would imply some 20%-30% discount to its NAV post transaction ($3.18) which is in the price range of $2.22 to $2.39.

If we look at the chart on the left, we notice that there was a surge of price to more than $1.80 from around $1.60 after the news was released on 13 June 2012. So how would you analyze and determine the fair value of this counter?

Some points from the media release by Orchard Parade are listed down here:
  • to inject its hospitality assets (Orchard
    Parade Hotel, Albert Court Village Hotel and Central Square Village Residences)  into a proposed Far East H-Trust for a cost of minimum S$720M In return, it will act as a operating lessee and own 33.0% of the shares in each of the REIT manager and trustee manager. 
  • to enter into an asset swap with parent Far East Organization to acquire its hospitality management business and selected healthcare properties (45 units of medical suites in Novena Medical Center (NMC), 48 units of medical suites in Novena Specialist Center (NSC)). As purchase consideration for these assets, OPHL will be divesting 35.0% stake in YHS to FEO at a 40.6% premium to its last traded price, with the balance to be settled in cash.  
  • Proposed special dividend and dividend in specie to shareholders, subject to shareholders’ approval for the restructuring and successful IPO of Far East H-Trust. OPHL proposes a special one-tier tax-exempt dividend of S$0.12 per share and a dividend in specie of the Company’s remaining 14.5% stake in YHS, which amounts to approximately 0.229 YHS shares per OPHL Share (i.e. 229 YHS shares per 1,000 OPHL shares) as at 31 May 20124.
  • Name change to Far East Orchard Limited to better reflect new positioning
  • The NAV per share post transaction but before distribution of dividend will be S$3.18
Summary of its hospitality assets lease:
  • Orchard Parade Hotel - 50 years leasehold will be transferred to Far East H-REIT starting from listing date. OPHL will then lease back on 20 years period and with another 20 years renewal options.
  • Albert Court Village Hotel - 75-year leasehold interest transferred to Far East H-REIT commencing from listing date. OPHL will then lease back on 20 years perio and with another 20 years renewal options.
  • Central Square Village Residences - 80-year leasehold interest in CSVR to Far East Residences commencing from the Listing Date
Detail of the transaction:
  • S$1M in connection with REIT transaction
 Use of Proceeds from sale of Hospitality assets ($702M):
  • $356M to discharge existing circumbrances over the Hospitality Assets
  • $58M as part of consideration of the Asset Swap Acquisition 
  • $9M as stamp duty chargeable on Asset Swap Acquisition
  • $44M for special dividend payment
  • $2M for fees incurred in connection with the Transactions
  • $233M used as working capital and to fund future business needs in property development and hospitality and healthcare sector
In my own calculation, the company currently has a total liability of $573M (as stated annual report end FY2011), the total asset after minus total liability should be {($702M [hospitality asset] + $362M [Asset Swap in between healthcare units and YHS shares] +  $149M [15% YHS Share @ $1.80] + $1,132M Total Asset minus Investment Properties and Investment in Associate Companies } - total liability ($573M) = $1,772M

Below are some of the figures extracted from company report on proposed REIT and related transaction.
Figure 1: Breakdown of the S$702M sales of hospitality assets to FEH-Trust. Further details on the formula for the determination of the sale consideration will be set out in the Circular. Source from Company.

Figure 2: NAV of Hospitality Assets at Annual Report - 2011 and relative figures to total NAV. Source from Company.

Figure 3: Net profit and NMC business value relative to OPHL. Source: Company.

NAV per share after the post-transaction, special dividend and dividend in Specie

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