What are you buying today?

[gitawa]

HK property companies are cheap as their property assets are valued at current (inflated) market prices. Factor in the probability of a correction and they're not as cheap as they appear.

Research In Motion/BlackBerry

I'm also trying to generate more cash to put to the side in case a buying opportunity arises. My average cost on BB right now is $11.

Haven't found anything else outside of EXOR and Henderson Land Development companies (which I think people should look closer at, especially Henderson).

I am just starting to look at Henderson Land, this HK company is ridiculous cheap. P/BV = 0.5x. Book value has grown around 10-20% EVERY year for the last decade..... does anyone own this baby?

I am still in the process of due diligence which involves just glossing over their 10K (or the ADR equivalent)

[plato1976]

A quick question is if their property are really valued at current market price, or valued at the acquisition price many years ago (maybe in some cases ?)
Not familiar with the accounting and the situation there, so just wonder...

HK property companies are cheap as their property assets are valued at current (inflated) market prices. Factor in the probability of a correction and they're not as cheap as they appear.

Research In Motion/BlackBerry

I'm also trying to generate more cash to put to the side in case a buying opportunity arises. My average cost on BB right now is $11.

Haven't found anything else outside of EXOR and Henderson Land Development companies (which I think people should look closer at, especially Henderson).

I am just starting to look at Henderson Land, this HK company is ridiculous cheap. P/BV = 0.5x. Book value has grown around 10-20% EVERY year for the last decade..... does anyone own this baby?

I am still in the process of due diligence which involves just glossing over their 10K (or the ADR equivalent)

[mcliu]

The properties are marked-to-market on their books as per IFRS, so you would see big fluctuations in book value depending on how their marking these properties. If you factor in the lack of control, poor governance, conglomerates running like family businesses, over-valued properties and weak asset allocation, the discount seems pretty rational. Obviously, there are some better conglomerates and some worse so there may be opportunities.

A quick question is if their property are really valued at current market price, or valued at the acquisition price many years ago (maybe in some cases ?)
Not familiar with the accounting and the situation there, so just wonder...

HK property companies are cheap as their property assets are valued at current (inflated) market prices. Factor in the probability of a correction and they're not as cheap as they appear.

Research In Motion/BlackBerry

I'm also trying to generate more cash to put to the side in case a buying opportunity arises. My average cost on BB right now is $11.

Haven't found anything else outside of EXOR and Henderson Land Development companies (which I think people should look closer at, especially Henderson).

I am just starting to look at Henderson Land, this HK company is ridiculous cheap. P/BV = 0.5x. Book value has grown around 10-20% EVERY year for the last decade..... does anyone own this baby?

I am still in the process of due diligence which involves just glossing over their 10K (or the ADR equivalent)

[prevalou]

Investment properties are marked to market but developement properties are at cost (and they are sold with strong margins). A lot of their properties and land bank are In the tier 1 cities In China. Are the market prices inflated ? It is not so obvious, although the newspapers say that all the time.

[randomep]

The properties are marked-to-market on their books as per IFRS, so you would see big fluctuations in book value depending on how their marking these properties. If you factor in the lack of control, poor governance, conglomerates running like family businesses, over-valued properties and weak asset allocation, the discount seems pretty rational. Obviously, there are some better conglomerates and some worse so there may be opportunities.

A quick question is if their property are really valued at current market price, or valued at the acquisition price many years ago (maybe in some cases ?)
Not familiar with the accounting and the situation there, so just wonder...

HK property companies are cheap as their property assets are valued at current (inflated) market prices. Factor in the probability of a correction and they're not as cheap as they appear.

Research In Motion/BlackBerry

I'm also trying to generate more cash to put to the side in case a buying opportunity arises. My average cost on BB right now is $11.

Haven't found anything else outside of EXOR and Henderson Land Development companies (which I think people should look closer at, especially Henderson).

I am just starting to look at Henderson Land, this HK company is ridiculous cheap. P/BV = 0.5x. Book value has grown around 10-20% EVERY year for the last decade..... does anyone own this baby?

I am still in the process of due diligence which involves just glossing over their 10K (or the ADR equivalent)

But Henderson is a HK company. Marty Whitman basically said HK has good regulations to protect minority shareholders. Do you not agree?

Also according to Wikipedia, twice the owner tried to buyout the minority shareholders but failed to get the votes. Their glossy annual report and 10% annual increase in book value seems to show that the minority shareholders get a fair shake. no?

 

[Zorrofan]

I think the point Prevalou was trying to make was that much of the growth in book value has been the result of increasing property valuations, and that property values may or may not be in a bubble. Not that Henderson was in any way being less than forthright.....

cheers
Zorro

[mcliu]

I'm not familiar with the regulations in HK, but I'm speaking about controlling shareholder businesses in general.

If the controlling shareholder is not friendly towards the minority shareholders, while they may not try to steal the whole company, there's nothing preventing them from larger than necessary expenses (having a couple of corporate jets, etc..) Hence you have these discounts to NAV, which may not be unwarranted.

The properties are marked-to-market on their books as per IFRS, so you would see big fluctuations in book value depending on how their marking these properties. If you factor in the lack of control, poor governance, conglomerates running like family businesses, over-valued properties and weak asset allocation, the discount seems pretty rational. Obviously, there are some better conglomerates and some worse so there may be opportunities.

A quick question is if their property are really valued at current market price, or valued at the acquisition price many years ago (maybe in some cases ?)
Not familiar with the accounting and the situation there, so just wonder...

HK property companies are cheap as their property assets are valued at current (inflated) market prices. Factor in the probability of a correction and they're not as cheap as they appear.

Research In Motion/BlackBerry

I'm also trying to generate more cash to put to the side in case a buying opportunity arises. My average cost on BB right now is $11.

Haven't found anything else outside of EXOR and Henderson Land Development companies (which I think people should look closer at, especially Henderson).

I am just starting to look at Henderson Land, this HK company is ridiculous cheap. P/BV = 0.5x. Book value has grown around 10-20% EVERY year for the last decade..... does anyone own this baby?

I am still in the process of due diligence which involves just glossing over their 10K (or the ADR equivalent)

But Henderson is a HK company. Marty Whitman basically said HK has good regulations to protect minority shareholders. Do you not agree?

Also according to Wikipedia, twice the owner tried to buyout the minority shareholders but failed to get the votes. Their glossy annual report and 10% annual increase in book value seems to show that the minority shareholders get a fair shake. no?

[jouni1]

the point is that part of the book value growth is because of this possible overpricing. if the correction comes their long term results will not look so rosy. i find accounting for real estate outside the US to be really idiotic.

for example in finland we just got REITs here. the first one (that went public) keeps revaluing their properties, shows this as profit and pays for a dividend by selling the (overvalued in books) apartments for an accounting loss.

as long as they sell considerably less than they have, the ones that are getting their "values" bumped will more than make it look like a profitable business. meanwhile, people are going crazy over easy ways to invest in real estate, and of course dividend yields 

i'm not sure this is the case in HK, but when i looked at some of these i read that they value the properties to market and show this as profit. didn't check up on it, as it seems to be the case in most places.

[prevalou]

another way to value investment properties, specially retail (marked to market in the balance sheet) is to look at the cap rate, considering space is scarce in HK and more and more chinese tourists visit the country.
Considering developpement properties valued at cost , the margins are so strong that even with a severe decrease in real estate prices, they will be ok. Moreover, some of thes properties are presold.

[jouni1]

generally developers who have a lot unsold newbuild inventory when the correction hits, have not done so well. also if shit really hits the fan, the buyers of the presold properties will back out if the cash hasn't changed hands yet. if there's debt, this is a recipe for destruction. if not, they can probably wait it out without losing too much money.

i was just trying to point out that one should probably not look at book value growth when looking at these after years and years of price appreciation. being lazy, i just shove these in the too hard pile.