Stamford Land - Stamp of approval
Thesis : Asset play on an illiquid Net cash company with no gearing. Essentially, I have access to numerous property with an absence of gearing, which acts as a debt Free REIT to earn rental income as well as potential divestment to unlock cash flow. Its holdings of prime property makes the holdings a relatively safe assurance of value, and there is no risk of fire sale (No gearing and healthy liquidity ratio) as I can wait patiently for the market to realize its value.
Sentiment on stock greatly battered by poor corporate governance (Minority shareholder oppression). Issue has been amiably resolved and there is reshuffling of independent directors in a bid to improve corporate governance. The collapse in profits is only temporary and has largely recovered. There is shareholder friendly actions of continual share buyback instead of mandatory dividends to return capital to investors, which are ac-creative as company is trading below its Net Asset Value. There is manager-shareholder alignment as Ow Chow Kiat is the majority shareholder of this company.
Caveats
1) Minority shareholder oppression is an ailment persistent in Singapore Market despite its developed economy status (Challenger).
If a company has questionable management integrity and de-listing occurs, it is possible that I will get low-balled and end up with average / poor returns despite holding into it for an indefinite period of time.
As an average minority shareholder, it is almost impossible to take active steps to liquidate a company unlike the vibrant corporate takeovers / activist shareholders scene in HK and US.
2) My understanding of Australia tourism industry is limited. As tourism is a cyclical / seasonal industry, I am not confident in assessing the earnings and cash flow of the company. The weakening AUD may affect dividend policy (which is very little) but may improve tourism inflow to Australia. This is mainly an asset play on a company with a good balance sheet.
I initiated a mid conviction position to take advantage of the absurdly negative market sentiment. There is potential further increase in lumpy revenue as the sales of the newly built units are launched. Nonetheless, the volatility of earnings of hospitality based companies is a concern and I need to develop further insight into Australia tourism trends before I increase further positions into this volatile stock.
Financial Results
http://stamfordland.listedcompany.com/highlights.html
The full year results turned in operating profits of S$102.4 million, a 54.4% improvement compared to the results a year ago. The Hotel Owning & Management Segment saw an improvement of 11.6% due to operating efficiencies. On the Property Investment Segment, we provided a S$12.0 million impairment write-down in Dynons Plaza owing to a reduced tenure in the remaining lease. The bulk of the profits is attributed to the Property Development Segment which booked in a total of 361 units out of a total of 712 units in Macquarie Park Village (“MPV”) in Sydney in this financial year. The remaining 177 units will be settled in the next financial years.
As reported in the last annual report, we have obtained development application approval under the Urban Activation Precinct for the construction of additional 60 units in the best tower in MPV, the Melbourne Tower. We are pleased to report that the construction of the Melbourne Tower was completed in April 2018 and we have launched the sales of these additional units.
Operational review
http://stamfordland.listedcompany.com/review.html
Hotel Operations & Management
The Group’s hotel owning and management segment continued to deliver stable results in the financial year ended 31 March 2018 (“FY2018”). The Group reported an increase in revenue from this segment of 2.7% from the previous financial year which was contributed mainly by an increase in revenue per available room (“RevPar”) of 3.1%. The operating profit shown a growth of 11.6%, which was attributed to higher revenue and lower operating costs.International visitor arrivals to Australia continued to increase and reached a record high at the end of March 2018 with a year-on-year growth of 7.6%. This upward trend is set to continue in the financial year ending 31 March 2019 (“FY2019”). Demand for hotel rooms in key cities, such as Sydney and Melbourne, is expected to remain strong and this will have a favourable impact of increasing room rates. However, secondary cities such as Brisbane will continue to experience pressure on RevPar as the supply of hotel rooms is expected to increase with new hotels entering into the market.
SYDNEY
Stamford Plaza Sydney Airport ("SPSA")
SPSA reported another year of good results, with
improvements in both room and food and beverage
(“F&B”) revenue.
SPSA was again awarded the Best Airport Hotel in Australia/Pacific Region at the SKYTRAX World Airport Awards in 2018. This is the fifth consecutive year that SPSA has won this award. As a choice hotel in the competitive Sydney airport precinct, SPSA achieved occupancy of above 90.0% and an improvement in RevPar of 9.8% in FY2018. Room revenue will continue to remain strong as domestic and international visitors continue to fly into Sydney. SPSA has built a strong base business over the years and is in a good position to capture this strong demand.
On the F&B business, our concept restaurant, La Boca Bar and Grill (“La Boca”) delivered stable results as SPSA continued its marketing efforts to promote it as the choice restaurant for Argentinian cuisine in the vicinity.
SPSA has plans to refurbish its lobby and rooms in FY2019 to enhance overall guest experience and strengthen its position as the best airport hotel in Australia.
Sir Stamford at Circular Quay ("SSCQ")
SSCQ delivered stable results in FY2018 with an
increase in room revenue due to RevPar growth of
2.4%, offset by a decline in F&B revenue.
SSCQ completed the refurbishment of its reception lobby to create a more intimate and comfortable area for guests at check-in/check-out to enhance their overall experience. Also, SSCQ has converted a common area to a revenue generating conference area to cater to the growing demands for events/ functions. SSCQ has further plans to refurbish its restaurant, the Dining Room, and to create an outdoor dining area to showcase the attractions of its iconic location.
MELBOURNE
Stamford Plaza Melbourne ("SPM")
SPM reported respectable results with
improvements in both rooms and F&B revenue in
FY2018. The refurbishment which comprised of the
construction of 26 additional rooms was completed
in September 2016, and the business disruptions
caused during the construction was not present
in FY2018 which contributed to the increase in
revenue. While there was an improvement in
occupancy in FY2018, SPM faced challenge in
moving room rates in the competitive Melbourne
market.
SPM has plans to refurbish its rooms in FY2019 to enhance overall guest experience and to remain competitive in the Melbourne market. Also, SPM is working on the feasibility of converting its restaurant and bar to our concept restaurant, La Boca. If successful, this will be our third La Boca in Australia.
BRISBANE
Stamford Plaza Brisbane ("SPB")
SPB delivered stable results in FY2018 and
maintained its position as the top hotel in Brisbane
in the highly competitive Brisbane market despite a
marginal decline in RevPar of 0.5%. SPB continued
to focus on its F&B efforts to maintain its position
as a choice venue for events/functions along the
Brisbane River precinct. Room supply in Brisbane
will continue to grow and with supply over and
above demand, this will create pressure on
occupancy levels and room rates in FY2019.
SPB has plans to embark on a refurbishment program on its rooms in FY2019 as it strives to maintain its leading position in the competitive Brisbane market.
ADELAIDE
Stamford Plaza Adelaide ("SPA")
SPA delivered stable results in FY2018 with an
increase in room revenue due to RevPar growth
of 3.1%, offset by a decline in F&B revenue.
Despite a marginal increase in revenue, SPA was
able to achieve higher operating profit from its
costs efficiency management and productivity
improvement initiatives implemented to overcome
the weak Adelaide market. On the F&B business,
La Boca in SPA continued to perform well, with an
increase in revenue of 7.2% in FY2018.SPA completed the makeover of its porte-cochere to blend in with the refurbished lobby and create a welcoming entrance for guests. SPA has plans to refurbish its rooms in FY2019 to further enhance overall guest experience so as to strengthen SPA’s position in the competitive Adelaide market.
Stamford Grand Adelaide ("SGA")
SPA has plans to refurbish its rooms in FY2019 to reinforce its position as the only five star hotel in Glenelg.
AUCKLAND
Stamford Plaza Auckland ("SPAK")
SPAK recorded another year of good results, with
an increase in revenue of 4.2% in FY2018. With
international visitor arrivals continuing to increase
in Auckland, SPAK was well-positioned to maintain
its position as a choice hotel in Auckland, thus
recording a RevPar growth of 6.7%.
PROPERTY DEVELOPMENT
The Group’s property development segment recorded stellar results for FY2018 where revenue increased by S$134.8 million to S$251.0 million, mainly attributed to the settlement of Macquarie Park Village (“MPV”). Despite the tightening of credit environment in Australia, the Group successfully settled 361 remaining units in FY2018, bringing the total number of units settled to 535 as at 31 March 2018. Construction of the last tower was completed in April 2018 and settlement of the remaining units will continue in FY2019 and beyond.The Group sold two more units at The Stamford Residences (Auckland) and continues its marketing efforts on the sale of the remaining three units.
PROPERTY INVESTMENT
The Group recorded a significant impairment loss of S$12.0 million on Dynons Plaza, owing to the depressed Perth market and the shorter lease term remaining. The Group is monitoring the lease expiry profile of Dynons Plaza and working to replace the single tenanted lease when it expires in 2020.Links
http://stamfordland.listedcompany.com/newsroom/20180711_174758_H07_AFDXYR2WO9FBHC73.1.pdf
https://sginvestors.io/sgx/stock/h07-stamford-land/company-announcement
http://stamfordland.listedcompany.com/stock_fundamentals.html
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