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General Category => Investment Ideas => Topic started by: yadayada on July 24, 2014, 10:51:07 PM

Title: 0703.HK - Future Bright Holdings
Post by: yadayada on July 24, 2014, 10:51:07 PM
Does catering, restaurants, food courts in Macau mostly i think. Also leases out a building, trades at less then 10x earnings (if I base it on their Q1, 12x 2013).

V high return on capital (they run like 24/7 because that fking city never sleeps), but the two most interesting things are capacity added in 2014 and 2015 (more then double their sqft) and the huge tailwinds Macau will see in the next few years. From the first you will see some margin expansion as well. And even with little sqft added revenue/sqft is growing, and now over 600$US / sqft.

Seems their moat is their locations, and owner/operator is legislator in Macau. As long as they don't fk it up, they will be fine. Also they seem disciplined in closing down places that give inadequate returns

Some reading material on that:

http://www.kimeng.com.hk/upload/research_reports/FutureBright_20121211_CV.pdf
http://www.ebscn.hk/upload/20130301/201303011362107131617.pdf
http://www.emperorcapital.com/filemanager/tc/content_66/2013-09-05.pdf
http://www.chinastock.com.hk/ewebeditor/uploadfile/20140305094057140.pdf

They have a decent record of paying out dividends, and it seems to me this thing can more then double within a few years. It basicly lifts on the gambling industry because a lot of their restaurants are in or next to the casino's. They have 2 restaurants in Macau airport, and do catering as well. And you get this pretty cheap imo.
Title: Re: 703 - Future Bright
Post by: 60°North Investments on July 25, 2014, 12:51:08 AM
Future Bright got just yesterday (24 July) the approval of their land bid in Hengqin http://corpsv.etnet.com.hk/webservice/jsp/ETNET/CorpAn/eng/detail.jsp?VERSION=ENG&DOCCD=81183.

From the analyst posts yadayada posted above, China Galaxy International (the last one) estimated that Hengqin would add 5.70-5.90HKD into their valuation if approved. However, they estimated that the company would get 140k m2 of GFA, when the company now received 50k m2. Also, the price of the land is higher 4.2kRMB / m2 compared to what these guys estimated.

I tried to draw the picture quickly and came up with some numbers based on the China Galaxy Intl report. This deal they got, 4.2k RMB per m2 for the land, about 14kRMB per m2 for construction. If it's worth 45-50kRMB per m2 that'd make 2.2-2.5bRMB (2.7-3.1bHKD) in total value? If you discount that with 50% and divide by 694m shares you get to 2-2.3HKD per share.

Would be great if someone had thoughts on whether that's in the right ballpark or not!
Title: Re: 703 - Future Bright
Post by: yadayada on July 25, 2014, 03:58:20 AM
well  50k sqm is 536k sqft right? They will build food plaza's, restaurants etc there. If they get 3000 HKD/sqft (half of what they do now), with half the net profit margins (about 14%) then that would be about 220 million HK$ in net income, or about 2.7 bn hk$ in value. If you assume better margins, then it would be more then 3 bn$. So more then 4$ per share. I guess 3-4$ per share sounds about right.

I have my sights set on more nearby expansion in Macau though, and growth due to infrastructure projects. I thinkn it will be at least several years before hengqin is finished.

I guess since they target to invest 1 bn hk$, 2-3 bn hk$ of value over the next decade sounds about right for Hengqin. that is probably the target, but if they fail in execution it could be less. So yeah 2 hkd is probably the minimum unless they completely mess it up.

So they have about 450mm hk$ now on the balance sheet. I guess they will invest another 600 million in the next few years. That probably means they will pay out about 20-30% of their net income in dividends.

I think that if they open their new places in Macau, and more inflow of people due to improved infrastructure + some operating leverage they can do close to 500 million in net income within 2 years or so.
Title: Re: 703 - Future Bright
Post by: 60°North Investments on July 25, 2014, 04:18:21 AM
Thanks for your thoughts yadayada! I thought about looking at the value that way as well but realized I don't really have an idea how much of that 536k sq.ft. will be restaurants and what portion will be other spaces. But like you said, it seems reasonable to think that with total investment of +1bnHKD they'll get to about 3bnHKD in value if things go according to plans. Management anticipated the Hengqin project's construction to take 3 to 4 years.

Please correct me if I'm wrong, but I think they're supposed to open about 160k sq.ft. of restaurant space this year (Huafa Hall being the largest part with 120k sq.ft.)? If this is the case, I wonder if you can simply expect that this doubling of restaurant space approximately doubles revenues within couple of years like you yadayada anticipate?

Any thoughts on what are the biggest factors/risks that could get this screwed over instead of being +7bnHKD (back-of-the-envelope: 2bnHKD Hengqin + 5bnHKD restaurants + 0.5bnHKD properties) in 2-3 years time?
Title: Re: 703 - Future Bright
Post by: yadayada on July 25, 2014, 05:34:32 AM
they have a building of 22k sqft in the middle of Macau, and they will rent it out for 25 million HKD next year (15 million past year, but leases ran out, and prices shot up in Macau). If you give a 50% discount (because it is not Macau centre but Hengqin), that would be 291 million HKD a year. Or with a 75% discount, 140 million a year. So I think 50% being added there in net income (100 million) is veyr conservative and somewhat of a worse case scenario.

So I think in 3-4 years, they could do between 350 million (very conservative, assumes Hengqin is a total failure, and doubling of sqft will not be as big of a succes in Macau) and 7-800 million hkd in net income a year (if Hengqin pays off). Currently they do over 200 million.

Just seems that even in a total bear scenario you cannot really lose on this one.

Also to give you an idea, Mcdonalds does like 1k$/sqft I think. They do about 600$/sqft in macau currently, but a lot of these places are open 24/7. So there might be some room to grow there. And if you look at their SG&A costs, they will not go up much. They are currently about 90 million HKD. So if they manage to go to 700$/sqft there is some operating leverage.

I also think that gross margins will go up, because some other costs like food distribution are centralized as well, and benefit from scale.

I think the biggest risk here is that when they get bigger management will lose some control over quality. And that might hurt revenue/sqft or cause more failures. Im not sure how big of a risk that is.

Another risk is that they do not pay out shareholders at least 30% of earnings like they stated. This will probably cause a low rating of the stock.
Title: Re: 703 - Future Bright
Post by: yadayada on July 25, 2014, 05:46:25 AM
btw to give some idea on infrastructure improvements.

There will be a 30 min train line between macau and Hong Kong airport within the next few years (this is huge, because Hong Kong airport is much bigger then macau airport). The number of hotel rooms in Macau will double between 2015-17 to about 60k.

There will be a train line through macau improving ease of travelling. There will be better connections to mainland China. And border control will be a lot more efficient allowing  through almost twice as many people in the same time.

Also penetration of mainland china people visiting Macau is like 1.5% vs 10% for Las Vegas. And length of stay is less then half that of Hong Kong and Las Vegas. To improve this they will build a lot of entertainment facilities on Hengqin island. I think they already finished a large water park in 2013.

Add in probably more disposable income for Chinese people over the next decade, and it would be hard to be bearish on Macau at all.
Title: Re: 703 - Future Bright
Post by: yadayada on July 25, 2014, 06:48:15 PM
http://quinzedix.blogspot.de/2014/07/future-bright-holdings-part.html

Not much new, except he thinks they could do even 900 million in net profit in a few  years. Either way, plenty margin of safety here.
Title: Re: 0703.HK - Future Bright Holdings
Post by: jch548 on August 05, 2014, 08:55:37 PM
The board (“Board”) of directors of the Company wishes to inform the shareholders of
the Company and potential investors that based on its unaudited management information
currently available, the Group will record a remarkable increase in profit for the six months
ended 30 June 2014 (“Period”) as compared to that for the six months ended 30 June 2013.



http://corpsv.etnet.com.hk/webservice/jsp/ETNET/CorpAn/eng/detail.jsp?VERSION=ENG&DOCCD=81269
Title: Re: 0703.HK - Future Bright Holdings
Post by: SpecOps on August 06, 2014, 07:28:37 AM
Gross operating profit up 29% in the first half sounds good, but the share count has increased by 10% too. At this rate I estimate they are on course to earn HK$200m attr. to equity holders excluding the 'property gains', so not hugely cheap with a market cap of $2.8bn.

Doubling square foot will obviously increase earnings a lot, but how much new equity will they raise to pay for it? I'm a bit confused why they pay a dividend when they are constantly issuing equity for growth.

I also worry a bit about Macau, obviously booming at the moment, but it will probably suffer disproportionately in a crisis.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 06, 2014, 08:47:06 AM
I think they will do 250-300 in net profit this year. And that is conservative. You have to understand their business. It is very high return on capital, and a pretty good competitive advantage.

the only large upfront cost will be Hengqin. The other ones do not require very large up front costs as they lease. And since this is a very high return on capital business they get a lot of FCF as they grow.

The share issuance was for the Hengqin project mostly. That will be very accretive in a few years if they can lease it out. By my calculations they do not really need to sell additional shares for that.

As for a crisis, that is not a large risk. On the short term it is. But I don't think China will collapse in the long term. It will just be a hiccup, and an annoyance because now you have to wait longer. Or a opportunnity to add if the stock crashes :).
Title: Re: 0703.HK - Future Bright Holdings
Post by: SpecOps on August 07, 2014, 02:19:32 AM
Is that 250-300 excluding the property gains they usually include in the income statement, and after minority interests?

I guess I am a lot more conservative :p
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 07, 2014, 05:58:33 AM
yeah and also excluding 25m rent they get I think. They did 180 last year I think. And judging by gross income and some operating leverage, I think they are on track to do at least 250 this year if they do not grow. But they have not yet opened the bulk of their new places. And also if they open these new places, they operate in prime locations with a lot of foot traffic. Or they do personel catering for some hotel or casino that is running. So it ramps up somewhat quickly. Not comparable to some restaurant in a small town trying to compete with 6 similar restaurants nearby.

And there are huge tail winds coming for Macau.

You gotta see it like this I think. They currently have like 140k sqft . This will be expanded to about 390 by 2017. They currently do about 6k/sqft with 35% gross margins. So if you assume foot traffic does not really increase, and their new places are only a moderate success at 4k/sqft and a 30% gross margin, then that will add over 300 million. Maybe add 70 million in SG&A expenses on top, I get +200 million in NPAT, or about 380m total NPAT. as 12x multiple on that is 62% upside.

BUT this assumes that new stores are not very succesfull, this assumes that current foot traffic does not increase, and this assumes that Hengqin will not really add anything. so this seems like a pessimistic base case to me.

If you look at Hengqin, that will be 80% let 20% operate. they get 1100hkd/sqft for their current Macau building. If they would only get 400/sqft then that is 171 million hkd. and a conservative 120mill for operating the other 20%.

If they actually improve revenue/sqft in Macau, then I get like 600 million excluding Hengqin by 2017. Hengqin will cost a billion hkd. They will pay 260 million this year for the land. Since they generate 200 mill + from operations, and opening new restaurants/catering do not require large upfront investments, and they currently have 600 million in cash, they will not need to issue shares.

Ofcourse the CEO is well connected so that plays a role in this, they have a good history of operating these things as well. Execution will be key here.
Title: Re: 0703.HK - Future Bright Holdings
Post by: jch548 on August 07, 2014, 11:59:33 AM
The roll out of restaurant openings is pretty slow. I think of the 158k sg ft they have slated to open maybe 10% has been achieved by the end of the first half. I wonder about this rather lofty 158k sg ft. projection. I have no idea how profitable these new locations will be as they seem to be stepping out of Macau here.

I do like the stock with the new casinos and hotels opening up over the next few years.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 07, 2014, 01:06:12 PM
Profit before taxes was like 117 million. That is about 100 million NPAT? This does not include property business and food souvenir business. So that will likely be more then 200 million this year. If you include property rent, that is another 25 million, or about 225 million if this does not grow and food souvenir does not add anything. So a 12x multiple. But I think it is pretty unlikely that they will do worse then 275-300m in net income this year. Red thinks it is almost 400, but I think that is too optimistic.

Also not included in 'to be opened' are the catering projects that could be won in the new hotels and casino's. This could add materially.

You basicly have to look at it like this, comps are trading at 18x earnings, you get a business with very high return on capital that will likely not decline for a  non growth multiple with lot's of potential option scenario's. So yeah bear case, you break even, bull case you make 5-6x your money within a few years.

Your paying 12x earnings for the catalyst and dividend while you wait.
Title: Re: 0703.HK - Future Bright Holdings
Post by: jch548 on August 08, 2014, 08:08:46 AM
More news was out last night. they signed a ten year franchise agreement to operate two Korean restaurant chains for ten years. An Italian themed chain and an upscale Korean eatery. I was hoping to see something like this as it expands their offerings.
Title: Re: 0703.HK - Future Bright Holdings
Post by: SpecOps on August 12, 2014, 03:21:12 AM
yeah and also excluding 25m rent they get I think. They did 180 last year I think. And judging by gross income and some operating leverage, I think they are on track to do at least 250 this year if they do not grow. But they have not yet opened the bulk of their new places. And also if they open these new places, they operate in prime locations with a lot of foot traffic. Or they do personel catering for some hotel or casino that is running. So it ramps up somewhat quickly. Not comparable to some restaurant in a small town trying to compete with 6 similar restaurants nearby.

And there are huge tail winds coming for Macau.

You gotta see it like this I think. They currently have like 140k sqft . This will be expanded to about 390 by 2017. They currently do about 6k/sqft with 35% gross margins. So if you assume foot traffic does not really increase, and their new places are only a moderate success at 4k/sqft and a 30% gross margin, then that will add over 300 million. Maybe add 70 million in SG&A expenses on top, I get +200 million in NPAT, or about 380m total NPAT. as 12x multiple on that is 62% upside.

BUT this assumes that new stores are not very succesfull, this assumes that current foot traffic does not increase, and this assumes that Hengqin will not really add anything. so this seems like a pessimistic base case to me.

If you look at Hengqin, that will be 80% let 20% operate. they get 1100hkd/sqft for their current Macau building. If they would only get 400/sqft then that is 171 million hkd. and a conservative 120mill for operating the other 20%.

If they actually improve revenue/sqft in Macau, then I get like 600 million excluding Hengqin by 2017. Hengqin will cost a billion hkd. They will pay 260 million this year for the land. Since they generate 200 mill + from operations, and opening new restaurants/catering do not require large upfront investments, and they currently have 600 million in cash, they will not need to issue shares.

Ofcourse the CEO is well connected so that plays a role in this, they have a good history of operating these things as well. Execution will be key here.

But how many shares will they issue to pay for this? I would guess Hengqin will need a lot of money for development so isnt quite a free option
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 12, 2014, 04:50:27 AM
This is a high return on capital business, FCF will be pretty high. If you read the post you would see they need another 400 million. I think they will generate 150-300 million this year alone. They don't need large up front investments for their other expansions because they lease it. So maybe they will issue some debt, but I don't think you will see any share issues from now on.
Title: Re: 0703.HK - Future Bright Holdings
Post by: sirius24 on August 12, 2014, 10:36:53 PM
I think FB is definitely is an interesting story with great historical operational performance and a good runway of growth to come.  The part I am getting hooked up on is how to actually think about the new risk profile given the majority 125k sqft (almost 100% of today's GFA) is coming from outside Macau.  I know you did discount the Macau operations when you ran the new sqft projections, but given the experiences of other HK brands moving into China and the difficulties even a top brand like Tsui Wah is encountering I could definitely see further downside to those #'s (granted Tsui Wah is investing for a full scale invasion unlike these guys).  And if you look at 50k of the new sqft as being a food court in the brand new Zhuhai mall and realizing they just shut down a food court in the Galaxy (their own backyard) - I can't completely eliminate the scenario where an entire 50k is not making money or in fact losing money for a couple of years.  Furthermore, I have some doubt that their brands really carry any weight at all outside of Macau, it seems their success is mainly due to their convenient locations within hotels like you guys touched upon earlier (don't see a local Zhuhai resident knowing/caring about Edo or whatever other brands they might role out).   

Don't get me wrong I don't think this is a base case by any means but given what happened at Galaxy I don't think it should be eliminated from consideration either and just wondering if you have a better way to think about this near term risk because I definitely want to be there for the Cotai stuff down the road.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 22, 2014, 10:00:27 AM
Full interim report out http://fb.etnet.com.hk/ca-ann-e.html
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 22, 2014, 10:05:50 AM
Sirius you are not counting in wins with catering operations from new hotels in the next few years. They are not mentioned in new 2014 footprint. That could be significant as well.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on September 11, 2014, 01:46:27 PM
stock is down a bunch. VIP gambling is trending down almost double digit % in the past few months. I doubt it has much impact though. Mass market is still going strong and provides more revenue for food service industry. Would buy if it wasn't a 10% position already. And gamblers still have to eat. VIP gamblers can only eat so much :) .
Title: Re: 0703.HK - Future Bright Holdings
Post by: jch548 on September 11, 2014, 03:48:34 PM
I've sold my shares as have heard things are slowing down. They have so many things going on I want to watch for awhile.

Invested the funds in TSEM. Trying to keep my positions down.

http://seekingalpha.com/article/2450305-towerjazz-a-towering-double-in-share-price

100% upside is possible based on possible FCF. Using up idle capacity and taking out over $100 in fixed costs as they shuttered a fab. The numbers look pretty good when you pencil it out.


Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on September 12, 2014, 09:31:54 AM
I think the bull case for FB is pretty basic. They are going to double their restaurant footprint within 3 years. They will also land some industrial catering jobs. Hengqin will add value. More people will be going to Macau in 5 years than now. Just need time for this to roll out.  It will double.  One of my 6 holdings.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on September 12, 2014, 12:02:23 PM
yeah it is trading for like 10x earnings. That seems too low even without growth. you see mass market is still growing this year. But a somewhat big decline for VIP.  Im going to wait for new infrastructure at the end of next year or so. Ill hold it for 1.5-2 years and see what happens.
Title: Re: 0703.HK - Future Bright Holdings
Post by: jch548 on September 13, 2014, 07:00:23 AM
The pe is higher when you back out the valuation gains. The thing that bothered me was the restaurant roll out seemed to be going very slow while they are incurring expenses. I like their prospects but want to see how they do the rest of the year.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on September 23, 2014, 08:29:10 AM
it is trading at a 12x 2013 PE with a lot of growth ahead that they can fund for the most part with current cash on balance sheet.

But SG&A is up a bunch this year because of anticipated openings in H2 2014. So it is probably trading at sub 10x 2014 earnings when that kicks in. Which seems way too cheap.

I think the value here is in all the catalysts.

-new restaurant openings in 2014 (relatively low risk if they fail)
-Hengqin island working out
-new possible catering for hotels
-28 new restaurants if hotels and casino's open up in cotai strip between 2015 and 17
-increased traffic in current places as number of hotels is doubled and infrastructure improved (which could add up to be a lot with massive operating leverage)
-the central food processing centre being finished in about 1-2 years (improved margins)

So if all of the above works out, this could be a 10x in 5 years time. If only some of it works out, it is just a double in a few years. Which is not bad.

And if you look at statistics, VIP gambling is down this year so far, but foot traffic and mass market is up almost 10%. And it seems very likely that in 5 years Macau will only be bigger adn more popular. Looking at vegas in the financial crisis, gambling revenue only went down 13% on the strip. This does not seem to be a lot, and this was in a mature market with increasing competition. Macau looks to be far from mature. Probably pays to not just focus on the short term here like the market is doing.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on October 30, 2014, 09:55:21 AM
This is one of the cheapest, high quality stocks I know of. I don't understand its price. Visitors to Macau and total spending is continually higher every year. Infrastructure spending is continually higher, the Chinese gov want to make it the tourism and leisure centre of the world. Future Bright is going to make more money every year. There are estimations that FB has only penetrated 5% of the market. They are consistently doing 20% Net Margins. They have a net-cash position. Turn to pages 58-61 of the interim report and they breakdown the total number of restaurants currently at 1h14 and the total expected by year end 2014. It is double. They are guiding to another 20-30 restaurants by 2019 and Hengqin is another high return project. I want to be investing in companies not only that are cheap, but that can reinvest at high ROIC. This is Future Bright.  There are just so many positive aspects looking at this company, I can list more if needed.

One method to value them:

Say they don't expand more than 2014 Year End total Retail Catering sq/ft numbers. Say it takes one year to ramp up those locations. So by FY 2015 results released in March 2016.

Sq/Ft: 288624
Rev/Sqft: 4800
Retail Catering Rev: 1386
20% Net Margin: 277
Shares: 694
12x FCF: 4.79
Plus Net Cash: 5.21
Plus Property Rental @ 12x: 5.48
Plus Ind Catering: 6$/share.

That's at XIRR of 73%.

So this quick valuation disregards: They are trying to land industrial catering revenue from the casinos. They haven't yet but have shown their capacity by servicing a university. One landed job may add ~20cents/share or 2/share at 10x value. That's not far off today's net cash price. This valuation also ignores organic growth--there are more tourists coming every year, FB will have scale advantages as they sell more food. It ignores growth from expansions--at 20% Net Margins, an investor wants them to reinvest in their business. And, this valuation disregards their Food Souvenir biz which is rapidly expanding, Wholesale biz, and the entire Hengqin project. Those are very important parts of their business that will be materially cash generative soon. This stock will be multiples higher in a short while. It's tied for my top holding, I added last night.

Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on October 30, 2014, 02:46:19 PM
I don't own any, but I think it's an interesting idea. What would you suggest I read to become comfortable investing in Hong Kong?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Packer16 on October 30, 2014, 03:15:50 PM
It is interesting but the 12x multiples of rent and FCF don't appear cheap (with only 85% upside) as you can get HK hotel real estate for less than 3x EBITDA and not much debt for Shun Ho and Asia Standard.  CSI is also less than 3x EBITDA with very little debt.   

Packer
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on October 30, 2014, 03:59:38 PM
Thanks for the comments.

12x FCF is based on comps trading around 10x EBIT. Another way to determine future share price is to look at a 30% dividend payout ratio and assume a 4-5% div yield, as mgmt is committed to distributing 30% of normal operating earnings, as they are now.

And Hong Kong is not Macau.

FB is just unappreciated because they are ramping up the equivalent of 100% of last year's foot print. It will take at least a year for margins to be normalized. But over that time they are reinvesting with their cash flows at 20% Net Margins. It's growth on growth. The market may not credit FB with the high ROIC and coming growth of 2015 investments even if they eventually price it fair based on TTM. So this low-upside case of 73% IRR will get rolled over for another year given more growth coming. It's a company I imagine I'll own for 3 years barring anything unforeseen. Remember, the earnings from Industrial Catering, Souvenirs, and Hengqin are not to be brushed aside. They will be worth multiples of today's share price alone! No exaggeration. I just isolated retail catering (plus a small amount of property rental and their minimal Ind Cat) to show a part of its earnings. The Industrial Catering I calculated is not indicative of what they are trying to capture of that market. And you can see the investment and store roll out of the souvenir shops in that same interim report I mentioned.

While an investor holds receiving a growing dividend waiting for the market to give it an adequate price, intrinsic value is increasing due to high ROIC growth opportunities and industry tailwinds.  I'm sure the IRR is over a 100% if we add in Souvenir Shops, Wholesale, Hengqin, and Industrial Catering.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on October 31, 2014, 01:31:27 PM
I don't own any, but I think it's an interesting idea. What would you suggest I read to become comfortable investing in Hong Kong?

Well, I don't think a person needs to be nervous investing in any country that doesn't have a history of appropriating stocks, or is in a state of war. And then it's just getting comfortable with the stock as you would every other time you research.
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on November 01, 2014, 07:39:43 PM
It is interesting but the 12x multiples of rent and FCF don't appear cheap (with only 85% upside) as you can get HK hotel real estate for less than 3x EBITDA and not much debt for Shun Ho and Asia Standard.  CSI is also less than 3x EBITDA with very little debt.   

Packer

Shun Ho does look interesting. Am I reading this right? It looks like they've got nearly double their market cap in cash on their balance sheet right now? They also look to be in great financial shape with good top and bottom line growth. This is why I feel uncomfortable putting money into Hong Kong. This just feels like a scam, or at least is there some catch? I know Hong Kong is not the same as "China" but still - this is crazy. I'm new to the world of investing, so things like this feel too good to be true, and I'm not quite sure what to think.
Title: Re: 0703.HK - Future Bright Holdings
Post by: physdude on November 01, 2014, 10:46:54 PM
Shun Ho does look interesting. Am I reading this right? It looks like they've got nearly double their market cap in cash on their balance sheet right now? They also look to be in great financial shape with good top and bottom line growth. This is why I feel uncomfortable putting money into Hong Kong. This just feels like a scam, or at least is there some catch? I know Hong Kong is not the same as "China" but still - this is crazy. I'm new to the world of investing, so things like this feel too good to be true, and I'm not quite sure what to think.

I only get a cash that is about half the market cap (http://www.aastocks.com/en/stock/CompanyFundamental.aspx?CFType=7&symbol=00253) but it still definitely looks cheap. The only problem is that they never seem to return any cash to their shareholders and just seem to hoard it  ::). I guess it is a great investment even with the near 100% run up in price over the last two years or so if you believe that you will eventually get to see the profits.
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on November 02, 2014, 05:25:22 AM
I only get a cash that is about half the market cap (http://www.aastocks.com/en/stock/CompanyFundamental.aspx?CFType=7&symbol=00253) but it still definitely looks cheap. The only problem is that they never seem to return any cash to their shareholders and just seem to hoard it  ::). I guess it is a great investment even with the near 100% run up in price over the last two years or so if you believe that you will eventually get to see the profits.

It looks like that data you're looking at is a bit old. Check out their interim report (http://www.shunho.com.hk/shr/documents/ir/e%20253%20InterimReport2014%2020140925.pdf). They sold a building in Macau for HK$900 million. I'm sure they'll use it to buy more real estate in the future. There are a bunch of interconnected connected companies here which makes this a bit confusing to me, but it looks like it warrants more study. Perhaps rather than hijacking this thread, we should start another one for Shun Ho (Packer?).
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on November 02, 2014, 06:33:06 AM
asia standard is interesting, but being a minority shareholder with shun ho stinks. They don't seem to pay out. Usually these hong kong stocks respond heavily to payout ratio's. If they don't pay out, they can trade at low multiples for years.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on November 02, 2014, 02:59:36 PM
I would like someone to invalidate the thesis of how one doesn't make a 70%+ IRR in Future Bright. And I think it is a lot higher than 70%.  If my holdings in Enterprise Group and Macro Enterprises pop on the next two quarters' filings, as I expect they will, I'll be adding to FB at these levels.

Title: Re: 0703.HK - Future Bright Holdings
Post by: cobafdek on November 02, 2014, 03:44:50 PM
I would like someone to invalidate the thesis of how one doesn't make a 70%+ IRR in Future Bright. And I think it is a lot higher than 70%.  If my holdings in Enterprise Group and Macro Enterprises pop on the next two quarters' filings, as I expect they will, I'll be adding to FB at these levels.

Sure, this might be a home run.  Who really knows?  The thesis may be sound, but it's not about the thesis.  I think Packer's point is that it's about the odds, and the odds stack up comparatively better for those other HK real estate companies.  Place your bets.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on November 02, 2014, 03:56:50 PM

[/quote]

Sure, this might be a home run.  Who really knows?  The thesis may be sound, but it's not about the thesis.  I think Packer's point is that it's about the odds, and the odds stack up comparatively better for those other HK real estate companies.  Place your bets.
[/quote]

I'm actually not sure what you mean. I'm not trying to be rude. I would say investing long term is about the thesis. Do the homework, try to understand the company and the competitive dynamics and the market and the environment it will be in in a few years down the road, etc., and buy or don't buy. I think it's all about the thesis.

I actually don't think Packer invalidated the thesis at all, or at least I don't understand how he did. Hopefully he can elaborate. Saying one company is "cheaper", doesn't invalidate my thesis of 70%+ IRR.  To me it seems like a non-sequitur to say another company operating in a different jurisdiction with a different business is cheaper and thus FB is not a buy. I'm all for hearing about other cheap companies, but how does it make FB not a buy?

Have you studied FB then to say its odds are comparatively worse than others? Are you saying FB is a real-estate company? Are you saying FB's operations are based out of HK because that's where it is listed and so should be compared to HK real-estate companies?

Thanks for the reply.
Title: Re: 0703.HK - Future Bright Holdings
Post by: cobafdek on November 02, 2014, 06:14:41 PM
I would say investing long term is about the thesis. Do the homework, try to understand the company and the competitive dynamics and the market and the environment it will be in in a few years down the road, etc., and buy or don't buy. I think it's all about the thesis.

I would say value-investing long-term is about the price.  I think it's all about the price you pay for your thesis.  The thesis needs to be impeccable to justify paying 12X FCF, assuming your figure is correct, and you'll be paying a high price for a cheery thesis if it's erroneous.   

I actually don't think Packer invalidated the thesis at all, or at least I don't understand how he did.

I'd be presumptuous to speak for Packer, since he is a superior investor with superior results comparatively.  But if I were posting what he had posted, I would have been primarily price-conscious, with no intent of trying to invalidate any thesis.

Have you studied FB then to say its odds are comparatively worse than others? Are you saying FB is a real-estate company? Are you saying FB's operations are based out of HK because that's where it is listed and so should be compared to HK real-estate companies?

I'd be the first to admit you and others know infinitely more about this company than I do, but my "research" stopped when I saw the numbers.  I may be missing a 10-bagger.  Your questions bring up valid theoretical concerns about what exactly are "comps," but using P/E comps, EV/EBIT comps, etc., though it has its drawbacks, is very Grahamite.  Your process appears to be different from mine, since I start with the value metrics,and don't go very far beyond, and almost never end up with a narrative/thesis.  Your process may work for you, such that I'll end up way off on this company, but it's only one company.


Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on November 02, 2014, 06:53:35 PM
Price is a central part of the thesis or the 70%+ IRR is not there.

I'm not paying 12x FCF now. Perhaps I worded it awkwardly before. That is what I used as a selling price down the road in the analysis.  One could also use an exit price based on 30% dividend payout of sustainable earnings.

I just think the company is very cheap based on its footprint at the end of 2014 as laid out by management. The earnings power is obscured by the massive ramp up of the doubling of their footprint and it will be made very clear in a matter of months. Etc. etc. I just think it's basic math and a company with tailwinds in a unique spot to capitalize.



Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on November 02, 2014, 07:30:05 PM
I noted the second largest shareholder of the company, Value Partners (one of Asia's largest hedge fund with c.10bn AUM so this is a really small investment for them) has been paring down its stake this quarter from 42m to 33m shares (c4.9% of total outstanding shares). What are people's view on this?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on November 02, 2014, 07:41:15 PM
Personally, I think trying to infer fundamentals of a company or changes in fundamentals of a company or fundamentals of the competitive environment, etc., based on the selling habits of large hedge-funds isn't a great strategy. 

I'm just trying to understand why the company exists, what its position is in the F&B industry in Macau, where I think the company is going, what the environment will be like a few years down the road, etc., and if there is sufficient downside protection and enough IRR to get me interested. I like Future Bright on all of these aspects. A hedge fund selling its shares doesn't change anything. Someone is always selling for me to be able to acquire shares.

Title: Re: 0703.HK - Future Bright Holdings
Post by: Packer16 on November 03, 2014, 01:31:31 PM
The way I look at investments in a market like HK is I would like to pay less than 50 cents for todays earnings or assets.  PB may do outstanding, I don't know as it's price to be cheap is based upon in part on future growth, which I cannot predict with any certainty.  I prefer stocks who are cheap with no growth but that does not mean that my deep value approach will do better than a growth approach with FB.  For both Asia Standard and Shun Ho, I can say that the companies are significantly less than 50 cent dollars with no growth (even though they probably will grow).  I am not a growth investor and others who can glean what growth investors want out of stock have done well its not my game.

Packer
Title: Re: 0703.HK - Future Bright Holdings
Post by: 60°North Investments on November 10, 2014, 10:53:54 PM
Q3 earnings are out (http://corpsv.etnet.com.hk/webservice/jsp/ETNET/CorpAn/eng/detail.jsp?VERSION=ENG&DOCCD=81693), and as the Q2 report anticipated there were significant pressures on the margins. EBIT was 22.3% versus 38.7% the year before, seems to be largely due to ramping up new locations and food souvenir shops.

The quarterly reports don't give out that much information, for example nothing regarding balance sheet and cash flows. Macau still attracts people, even though less VIPs. Worries for me are that the growth rates in revenues haven't shown to be as large as could've hoped. If "all three restaurants and a food court" at Huafa Mall that they opened by mid-October mean the 122k sq.ft. that they were planning to open there I would assume next year we should start seeing very rapid revenue growth unless something's wrong? If they have now essentially doubled restaurant space from December 2013 it must show as a pretty decent growth after the initial ramp-up (3 months? 6 months? 1 year?).

With the franchising deals they signed earlier they mention in the report to open up in total +50 restaurants. I'm not exactly sure what to think of it though. They now have the doubling of sq.ft. with Huafa Mall, University of Macau and Macau Intl Airport, expanding the food souvenir business, Hengqin project and industrial catering expansion perhaps to casinos. Is it reasonable to expect that they can really do all of these properly, or is this seeming lack of focus going to shoot them back?

It seems that with the current 2.6HKD share price things need to go very badly. The Hengqin project alone, unless something goes very wrong, accounts for a majority of the current share price (assuming the space would be valued around 45-50kRMB per sq.mt., with a 50% discount to NAV and 694m shares, equaling 2-2.3HKD/share in value). And with for example last year's EBIT, 270m (this year so far 205m), you're buying the company with a market cap of 1800m (EV about the same unless they took hundreds of millions in new debt in Q3).
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on November 11, 2014, 08:44:24 AM
My thoughts align with yours. I think we need some time to see how ramp up does. Mgmt stated it's at least a year for ramp up of a restaurant.  Mid 2015 revenue should be very interesting.  Their growth plans are very aggressive. They've now stated well over 60 new restaurants planned for the next 5 years excluding Hengqin. In theory, given their historical margins of ~20%, it is a good thing. Plus there should me more density of customers going forward, some operational leverage working in their favour. But that would be a big project to pull off and needs to be executed well. The stock seems absurdly cheap even if they stop expanding by this year's end and true revenue starts rolling in.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on January 20, 2015, 09:17:20 AM
Added more last night to Future Bright, going from 13% position to 20%. One of the safest and cheapest stocks I can find.  If they were to land a catering gig, they are trading at roughly 1x its earnings.  They are around 1-3x earnings right now ex-cash. At bare minimum, the stock is worth double. And multiples above the share price most likely within the next 3 years. Should be interesting.
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on January 22, 2015, 11:52:10 PM
Share price took a hammer today and is now almost 20% cheaper than few days ago, since Monday. Broke down HKD2 for first time since early 2013..

No unusual large trading volume .. though I did see recent news where Alan Ho, a newphew of local kingpin, who manages the Hotel Lisboa; and several of his liutenants were under arrest for suspected prostitution ring.

The founder CEO (who owns >40% stock) spent a majority of his career at Hotel Lisboa as part of the management; and should have overlapped with Alan Ho earlier in the 2000s..

Even if says the founder CEO is hit-by-the-bus proverbial or in worst case, implicated in any of the investigations/ cases in Macau (I did google search but couldnt find any), I would still think the business, at its current valuation, is way too cheap.. and, the operation in its current state probably can run-without his involvement..
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 26, 2015, 05:06:17 AM
Doubled down on this one. 18.5% now. Add another 1.5% when some cash has settled a few days from now. Looks like one of the cheapest stocks out there now.

For 1250m$ you get 600m$ in net cash, 500m$ in prime real estate. And a recession proof solid cash flow stream for almost free, that will likely do 150-200m$ this year? Will be curious what earnings are without the 40m$ marketing expense. And you get any other growth from free basicly.

Even if CEO was somehow involved in shadiness, it is hard to lose here. And easy to see how this could be worth 4-5x the current market cap a few years from now.

Even without protection of underlying assets, your basically buying a growing business with a decent moat for 7-8x earnings.
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on January 26, 2015, 06:40:34 AM
i think my main issue with that stock is that their profit margin is going to get squeezed dramatically in 2015.
Let me explain :
On one side the wages are going up :
when walking in Macau you can see that restaurants are struggling to hire employees ( jobs ads on their door )
unemployment rate is now 1.7% and new casinos are expected to open soon building up the pressure on wages ( already trending 5-10% up )
On the other side, revenues are going down as F&B are highly correlated to the casinos GGR which are dropping 20-30% yoy

Scissor effect for the margins in 2015...

Cash on balance sheet = be suspicious in Asia if it builds up with no plan to return it to shareholders
Prime real estate = some pure listed properties play are trading at 50% nav so apply a safe discount on it

Happy to kick off a real discussion and be proven wrong

 
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 26, 2015, 07:03:25 AM
Those are all non issues. Wages would have to skyrocket for it to be a problem. 10-20% increase in wages and the company would still do 90-100m$ in FCF.

And food and catering is more correlated with visitors to macau. There are some huge tailwinds there, and that number was up like 8 or 9% in 2014. Only thing that is down a lot is VIP gambling. And those are mostly a few very rich guys. Which matters to casino's, but not to the food business.

Hotel rooms are still close to fully booked through out the year, and the number of hotel rooms and casino's will be doubled over the next few years.

And cash on the balance sheet will all go to Heng qin project. It looks quite promising as there will be free internet, and the university of Macau is on that Island (FB actually does the catering). almost 50b$ US is invested in Hengqin at the moment, and it seems their 1 billion HKD project that most of the cash will go to there will probably be worth more in time. The plan is that Hengqin island will combine with Macau and both become a large tourist attraction. Since the CEO owns 45% and is in the middle of this,  I doubt he will waste a billion hkd on this if it were likely a dud.

Finally these guys show that they either have serious plans to invest the cash, or return it to shareholders. I think they returned like 30% to shareholders in the past.

I think to get what is going on here you have to look past the superficial numbers.

Finally their 500m$ piece of real estate is generating steady (and growing) rental income, which will likely returned to shareholders over time. Not like those other real estate companies that seem to not care about minority holders, or only hold it to speculate.

And management seems to shut down non profitable operations. They seem to care about shareholder value (probably because CEO is largest shareholder).
Title: Re: 0703.HK - Future Bright Holdings
Post by: theasiareport on January 27, 2015, 02:37:50 PM
From the footnotes:

"As at 30 June 2014, all the secured bank loans of
HK$340.2 million (31 December 2013: HK$346.8 million)
of the Group contained a covenant that Mr. Chan and his
associates had to hold not less than 37% (31 December
2013: 40%) equity interest holding of the Company.


The unsecured bank loans with maximum facility of
HK$75,000,000 (31 December 2013: HK$75,000,000) of
the Company contained a covenant that Mr. Chan and his
associates had to hold not less than 37% (31 December
2013: 40%) equity interest holding of the Company.
"
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 27, 2015, 03:08:08 PM
Asiareport what are your thoughts on the company? Find any flaws in the previous points i made?

That covenant is probably in there so the CEO will keep an eye on quality control?
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on January 28, 2015, 08:36:44 AM
Does anyone have thoughts about the success of the Hengqin project?  It is a huge investment for the company (total cost HKD 1.1bln) vs. current EV of 0.9bln.  Definitely could be a material risk for FB if it does not succeed. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on January 29, 2015, 02:28:07 AM
Hengqin is too early to make a call, and from what I understand, it's really a long-term play (for next 10++years).
The bigger risk that I see in this company is really the Key Man risk and the associated political risk.

Ultimately this is a F&B business, which is notoriously competitive with no barriers of entry. The only edge the Company has is its exclusivity within the large casino complexes (which I believe are on 5-year lease contract).And I think it is fair to say that the key (if not only) reason why the Company manage to secure these leases are largely due to the founder CEO's connection/ network. The Co manages such a diverse range of cuisines and doesnt have any single strong brand, unlike Tsui Wah or a typical QSR...
I cannot see any reason why the casino operator would not lease the restaurants space to other players upon lease expiry if the CEO is no longer around - for whatever reason..

It also seems that the CEO is somewhat involved in local politics?
If he loses out in a political struggle - and I think it is fair to say that in China, it's really a game of throne - just look at Bo Xi Lai and his allies etc, will/can this Co survive in the longer term? Too many such "politically"- linked companies (with pristine balance sheet, strong growth prospect) in China that went down...
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on January 29, 2015, 07:53:02 AM
I agree... Here's the way I see it...

Positives- long-term Macau growth due to new hotel supply, Hengqin upside optionality, Optionality from industrial catering/souvenirs business

Negatives- Sustainability of current very high F&B margins, Hengqin development & execution risk, key man/political risk, regulatory/macau risk....


On a different note, has anyone had success speaking to IR at FB?  I have emailed them but haven't heard back and am curious as to whether they actually speak to investors. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 29, 2015, 08:45:03 AM
I think valuation is more then compelling. If Hengqin is a failure, they dont get new catering and margins get squeezed 10-15% (which would mean an even higher pay increase), it should still  be worth more assuming a conservative valuation.

If they finish building their 50k sq ft building, and get 5k$ per square feet for it if they would sell, then that building should be worth 2.88$ per share alone (this is current market valuations of transactions in that area). The fact that they paid so little for that land is basicly a subsidy from the government. If it is a failure, it is still probably worth more then 1$ per share. Even with no new contracts and margin squeeze, the food business is probably worth 1.5$ per share (assuming 95m in  earnings with a 11x multiple, a 35% decline in earnings). The yellow building is worth about 75 cents. So in a worst case scenario where non of the upside happens, hengqin is a failure, and margins get squeezed, that should get you 3.25$ per share.. Let's put a big fat 25% discount even on that, and we get 2.5$ per share, or about 25% upside in the bear scenario.

Any of those things do work out, and shares should be trading at 6-7$ at the very least.

So I wouldn't say those things you mentioned are real risks. Id say actual downside risk from current valuation is

1. minority holders get screwed, giving a large discount on assets, in combination with:
2. food business declines and they get no new contract renewals.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on January 29, 2015, 09:40:11 AM
Can you elaborate more on how you are valuing Hengqin?  Are you including the cash outflow from Future Bright for land acquisition and development?

With 50k sq mtrs at 5k per sq mtr, I see 250mln of value using your numbers.  However, they will have to spend 260mln to acquire the land and then ~850mln to develop the site for a total investment of 1.1bln (as they have disclosed).  Thus, if your 50k and 5k is right, then isn't Hengqin a significant loss (~-1.00 per share) for FB? 

Apologies in advance if I have misunderstood your analysis.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 29, 2015, 09:49:23 AM
oh Sorry my assumptions were USD. I converted to HKD, i guess that was kind of unclear. so 5kUSD per sq meter. Current property prices average about 25-30k yuan/sqm, that is about 30k hkd. Or a value of about 1.5bn hkd if property prices stay the same. I got the sq ft and meter mixed up in my last post too. So that is Sq meter not Sq feet.

1.1 billion hk$ will be put into the project. They got a mortgage and about 900m$ of cash now. They will generate likely another ~150-200m$ this year alone from operations. So if you take value 2-3 years out with same value per square meter, I get 2.16$HKD share for Hengqin alone. valueing the food business at 1 billion hkd (assuming earnings get a big squeeze), that is 1.44$, and about 0.75$ for Yellow house. That is 4.35$. And this is being pretty pessimistic about their food business, which i think is not really warranted.

If you read red's posts about it (and the comments) he explains it much better then I do.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on January 29, 2015, 09:56:56 AM
OK.. so I see 50*38.75 HKD=1.9bln - 1.1bln cost = 840mln net value or 1.2 per share in that scenario.  Do you disagree?
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 29, 2015, 10:04:55 AM
OK.. so I see 50*38.75 HKD=1.9bln - 1.1bln cost = 840mln net value or 1.2 per share in that scenario.  Do you disagree?
well they have 600m$ in net cash now. And im using value of 2 years in when everything is cleared up most likely and there is no confusion about the risks. So in my assumption there is no net cash position, and the value of the total project.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on January 29, 2015, 10:22:41 AM
OK.. I was only considering Hengqin.

Re Cash, I am not sure how comfortable I am giving them 100% credit for the cash for a couple of reasons

1) the banks are requiring them to overcollaterize the loan with cash (at 12/31/13 207mln of bank deposits were being used to secure 200mln bank loan- note 22).  While I understand that some level of security is normal in this market, why is the level pledged bank deposits over 100%?   

2) Management decided to raise 260mln this summer despite having almost 300mln of net cash already on the balance sheet and a business that just generated 200mln of FCF.  Might some of this cash be required for ongoing operations (perhaps to be considered well capitalized by their F&B customers) and not available for projects like Hengqin? 


Appreciate the dialog and hope I am not annoying you too much with my questions/thoughts.  I agree there are some interesting elements here but there are definitely some risks that I am not comfortable with yet. 



Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on January 29, 2015, 10:45:10 AM
I dont know, maybe because they can pay lower interest then? I think what is likely, they will sell a % of the Hengqin project to a developer. So with the current net cash balance they will pay all the costs easily. So 2 years from now, they likely have a net cash position + 2/3 of a hengqin piece of real estate .

On the other hand, if earnings would double with succesful restaurant openings and 1-2 catering jobs, and real estate prices rise in hengqin if investment heats up there, the shares could be worth 10$. Let's say 1.7 bn$ for 70% of heng qin (assuming 6k USD /sqft). 350m$ in earnings = about 4 billion$. 500m$ for yellow house and 3-400m$ in net cash (or dividend payments). That is about 9.3$ per share. So seems like you get a huge margin of safety here. Huge upside with no risk (?) at current price. Gotta love the hong kong stock market!

If you read Red's analysis, he thinks earnings could go up to over 1 billion , in that case upside is probably closer to 20$. But let's wait and see before that happens.
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on February 09, 2015, 09:13:10 PM
Q4 result is out.. Gross Operating Profit for FY2014 is expected to be 249.2m vs 271.8m in FY2013...

"The Board wishes to inform the shareholders of the Company and potential investors that based on its management information currently available, the Group will record a considerable decrease in profit for the year ended 31 December 2014 as compared to the year ended 31 December 2013."

"The gross operating profit, being gross margin less direct operating expenses, of the Group for the Fourth Quarter was about HK$44.4 million, representing a decrease of approximately 39.8% as compared to the fourth quarter 2013 of HK$73.7 million. The gross operating profit margin for the Fourth Quarter was about 19.5%, a decrease in about 16.5% compared to the fourth quarter 2013 of 36.0%. Such decrease in gross operating margin in the Fourth Quarter was attributable mainly to the increase in direct operating expenses related to the newly opened restaurants at Huafa Mall, Zhuhai and the continuous loss incurred by the food souvenir business in that quarter."

"Management believe that in the coming first half of 2015, the Group’s operating environments would remain quite challenging, and the Group would be cautious to monitor the development of its food souvenir business and franchise restaurant business. "
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on February 10, 2015, 06:31:06 AM
I actually didn't think the Q4 result was that bad compared to my expectations.  Annualize Q4 GOP less property revenue is 150mln of GOP.  Remove admin expenses of ~106mln (TTM H1) generates 44mln of EBIT including the losses from the start up restaurants and food souvenir.  Haircut cash and investment property by 20% and  Hengin by 30% and its worth ~1.25 per share in a very conservative scenario. 

Upside comes from one of multiple options 1) F&B EBIT growth due to recovery/new restaurants, 2) Hengqin success, 3) Industrial Catering Growth, 4) Food souvenir growth (or at least stemming the losses).

Success of some of these options could easily drive the share price over HKD 5 vs 1.25 on the downside so the risk reward appears pretty attractive albeit volatile at HKD 2.  Thoughts?

PS- one option for the cash/debt question is currency related.  It could be that all the cash is RMB but the company wants HKD liquidity for dividends etc.  That could explain why they have borrowed with 100%+ collateralization.  Have not been able to confirm with the company yet.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on February 10, 2015, 06:59:50 AM
I think 1.25 downside is extremely conservative. That would assume their F&B business is wiped out overnight. If you add back one time advertising of 40m$, and some one time costs this year and assume that they get their souvenir business to breakeven that business still does 150m$+ in FCF.

I think the stock should be at 3.5$ at the very least. Let's see how it plays out in the next 2 years. Some big casino openings coming up.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on February 10, 2015, 07:25:40 AM
Agree that its conservative as it assumes that they will continue to lose money in souvenirs/new restaurants at a similar level forever.  The counter point is that there may be more downside for their core restaurant profits if Macau continues to slow through H1 15 (which they suggested was possible in the PR).  Net-net my point was that even with very conservative analysis, the risk-reward seemed attractive.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on March 16, 2015, 10:34:35 PM
I'm still very excited for the long term prospects of this company. Their footprint has now doubled from 133'179 sqft 2013 to 277'102 sq/ft 2014. Lots of that was 2h14 and it can take a year to ramp up a new restaurant.  That does not include the Food Souvenir shops they opened in 2014 that are currently loss making.

MOS: I see 1.10$/share is non-core assets (cash/equivalents and investment properties) that could be liquidated. I've assumed they need 25% of cash on hand for normal operations and they liquidate the Inv Prop at a 25% discount--so I'm being conservative. The remaining equity stub would be trading at 50 cents/share based on the current 1.60 share price.  Suppose a 6x multiple on 2012 net ordinary operating profits of .18/share and the new "core" equity should trade at 1.05/share. Add in the non-core liquidation and you have 2.16/share. To me this is the MOS, worst case scenario--35% above today's price. And their footprint is now over 2x the 2012 footprint.

When I add together a base case Food and Catering, Food Souvenir breakeven, Food Wholesale, Property Rental, Hengqin at acquisition cost I get 308$ Net Income.  10x on that is 4.80$/share. But likely Industrial Catering or Hengqin contribute more and the margins on their current operations I've assigned are too conservative. I think 8$/share is very reasonable over the next couple years.

I see large upside and protected downside. 16% holding.
Title: Re: 0703.HK - Future Bright Holdings
Post by: 60°North Investments on March 17, 2015, 03:05:44 AM
I share the views of Laxputs. It's now trading at a p/e of 6.5 and ev/ebit of 4.5 if you deduct $130m paid for Hengqin in January. H2 was disappointing, same store sales were down 7%. They'll continue ramping up more restaurants, food courts and food souvenir shops in the coming years. In H2 alone they opened 135k sq.ft. of restaurant spaces, a massive increase as Laxputs said. Capex was $27m in 2013, versus $186m in 2014. Gross margin % was slightly up in 2014 to 73%, so they haven't at least discounted the foods.

I'm especially looking forward to the sales figures of food courts in 2015. They now have 21 of them, 19 new ones in H2. For the past three years, sales from food courts have been $60m, $62m and $65m, which I find a little puzzling. In 2014 they had 21 food courts, 2013 it was 2 and 2012 10. I'll be interested to watch whether those 19 new ones will be delivering decent sales in H1 or not.

Also, management stated that Hengqin's foundations will be laid in the end of 2015. The whole building process may take up to 3 years, and they will "in due course find appropriate partners to participate in this proposed investment".
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on March 17, 2015, 10:21:44 AM
On their balance sheet: "Investment Properties". Is that the building they are leasing out and Hengqin? Or just one? Others?

TIA
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on March 17, 2015, 08:54:10 PM
For the past three years, sales from food courts have been $60m, $62m and $65m, which I find a little puzzling. In 2014 they had 21 food courts, 2013 it was 2 and 2012 10.

Those are food court counters, not whole food courts. Food court counters have a high variability in sales, depending on the quality/price of the food they sell, size, the location within the court, competition with nearby counters, etc. Yet, the lack of correlation you point out is a bit puzzling indeed.

For those who missed it, FB released a document on 16 march, which seems to be most of the coming 2014 annual report, but without the pretty pictures....

http://fb.etnet.com.hk/ca-calendar-e.html
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on March 23, 2015, 06:16:26 AM
i think my main issue with that stock is that their profit margin is going to get squeezed dramatically in 2015 compared to 2014.
Let me explain :
On one side the wages are going up :
when walking in Macau you can see that restaurants are struggling to hire employees ( jobs ads on their door )
unemployment rate is now 1.7% and new casinos are expected to open soon building up the pressure on wages ( already trending 5-10% up )
On the other side, revenues are going down as F&B are highly correlated to the casinos GGR which are dropping 30-40% yoy

Scissor effect for the margins in 2015...

Cash on balance sheet = be suspicious in Asia if it builds up with no plan to return it to shareholders
Prime real estate = some pure listed properties play are trading at 50% nav so apply a safe discount on it
Plus on the Hengqin land they bought at the top, they are likely to take a hit in mark-to-market on their book value. It is still the no man's land that I saw a few years ago, no life in sight except mosquitoes

Happy to kick off a real discussion and be proven wrong
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on March 23, 2015, 08:03:05 AM
Allow me to explain why I think those are not really issues

1. wages are only a smallish part of their costs, even with dramatic increases, it would still only raise total costs by a few %. And even if costs go up a lot it doesn't matter as the company is so cheap. Besides unlike casinos they can attract foreigners, and connections to mainland China will improve over the next few years. If you take out one time costs (like ~50m one time marketing and some opening costs) they will make 180m-200m$ this year. Even if you squeeze that by 100m$, that is still cheap. If you look at personel costs, you would need to see a large drop in revenue, and a very large pay increase (large double digit %).

2. F&B is more correlated with amount of visitors (aside from the few high end restaurants they operate). And # of visitors rose by 8% in 2014, and seems to be steady so far in 2015. There were even complaints that the large number of visitors were hurting quality of living. Most of the drop in revenue to casinos was high rollers, and they dont make up a large part of income (because there are not that many of them) to F&B. And if anything Macau has reached a limit of the number of visitors they can take (due to space and overbooked hotels, which will be fixed).

3. cash on balance sheet, they do have real plans, they will invest it in their recently acquired plot in Hengqin over the next 2-3 years. And prospects on Hengqin look more on the positive side. They also got this land quite cheap due to basically a subsidy, so it will probably be worth more each year with the amount of investment this area has attracted so far. I think they have about 700m$ on the balance sheet right now, and likely most of that will be invested in their Hengqin project. I think they have this cash balance to get leverage for when they sell a % of this project to a developer.
 
4. A lot of property companies dont treat minority holders well, and dont pay out a whole lot of money. And they have weird structures and hoard cash without investing it, and have a lot of real estate in mainland China with shakier prospects. But FB has paid out 30% of earnings, and seems to treat shareholders better, so discount will be smaller. And there are no weird Matryoshka structures.

And I think long term prospects are really good. Penetration rate from mainland is really low compared to Las Vegas, Chinese love to gamble, and disposable income will grow in double digit % for some years to come. And Macau is only place to gamble, while Vegas has many competitors throughout the US.

 If you look at tourism spending in China, GDP has doubled between 2008 - 2012, while tourism spending as a % of GDP went from 2.8 to 4.4%. So tourism spending almost quadruppled. So there is a sizabe amount of leverage here once GDP reaches a certain level. Even GDP only grows 20-30%, disposable income will rise much faster. Also the number of casino resorts per person in Asia is really really low compared to the United States. Plus new infrastructure and entertainment making Macau much more attractive and easy to reach.

And you can profit from that growth potential, buying the company for little over 5x 2013 earnings under NAV! So you dont even need growth to do well here imo.
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on March 23, 2015, 08:07:14 PM
2. F&B is more correlated with amount of visitors (aside from the few high end restaurants they operate). And # of visitors rose by 8% in 2014, and seems to be steady so far in 2015. There were even complaints that the large number of visitors were hurting quality of living. Most of the drop in revenue to casinos was high rollers, and they dont make up a large part of income (because there are not that many of them) to F&B. And if anything Macau has reached a limit of the number of visitors they can take (due to space and overbooked hotels, which will be fixed).

My impression is that almost 50% of their revenue still came from their high-end Japanese restaurant chains Edo - which if you do a google search, you will see a number of increasingly unfavourable review in particular of their service standard(from sites like TripAdvisor which I presume would be quite reliable) ...
The correlation between high roller and Future Bright's business is probably higher than many people realise..

Further - I am not sure how exactly a steady growth in tourist spending on Macau F&B would directly benefit Future Bright.. Yes they are opening more restaurants but given the high competitive characteristics of any F&B business (as  they start entering into mass markets) - it is hard to see how they can continue maintain their existing margin (which is primarily derived from the high-end restaurants located within casinos).. Bruce Greenwald summed it up well: a non-franchise growth has not value at all..
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on March 24, 2015, 07:49:44 AM
I think part of japanese restaurants are other franchises as well, about half I think as of 2013.  Also it is not like their profit will dissapear now, simply margins are compressed.

Also their footprint doubled, and they had one time costs, and footprint of Japanese barely went up. Even if margins are cut, removing one time costs they will make close to 200m$ once new places start ramping up. And 150m$ if they add nothing and if food counters lose money. They will have a 500m$ building generating steady FCF, and their Hengqin stuff which could be worth well over 1bn$.

So apply a 8x multiple on 150m$ (just to be really really conservative, assumes all their new footprint breaks even and EDO does not recover) add 500m$ and add about 800bn$ remove 300m$ of debt, and you get a 2.2bn$ valuation, more then double. I dont think anyone is arguing that their core business is the best thing ever, but add in some steady new catering gigs and I think the company is very mispriced.

Also I dont think highroller gambling will stay low forever. I think it will recover at least partially at some point. I mean I dont care what happens this year, as long as what happens 2-3 years from now is positive.

And there is huge optionality, catering could add a whole lot, if traffic goes up in Macau area it must positively impact FB, if higherroller stuff recovers, etc. Food counters are a success. Even if only one of those things happen, upside gets boosted a lot. Net income could easily go to 4-500m$ in a few years.

So even with pretty pessimistic assumptions, and then putting a big discount on that you get upside here. Tsui wah is probably higher quality, but then your paying 20x earnings and several multiples over NAV vs 5x earnings here and below NAV.  It is priced like it is rapidly going out of business!
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on March 26, 2015, 06:30:01 AM
I will wade into this with my thoughts as well...

1) To me, the key issue is the F&B margins.  Here is how I calculate H2 14 F&B margins.  I take GOP of 85.9 - Admin of 61.8 - property revs of 14.6= 9.6mln.  To this, I add back 43.8mln of souvenir losses to get an implied F&B EBIT of 53mln, down from 99mln in H1 14.  The question for me, is how much of this margin degradation is due to start up costs of the new restaurants in Q4 14 vs. worsening restaurant performance.  If it is mainly due to the start up costs, then I think H2 15 and 2016 EBIT will start to show a significant rebound,  However, I agree I am worried about the weakening performance of the Japanese restaurants (still ~50% of sales) and the risk that prior margins were inflated due to an abnormally strong period in Macau VIP.

2) I am less worried about the valuation of Hengqin.  Research suggests that they got a very sweet deal on this land, most likely due to Chan Chak Mo's connections.  I think the bigger risk on Hengqin is really more the key man risk of what happens to the deal (and to the business at large) if CCM becomes persona non grata in Macau.  If they are able to develop as planned, I think that deal is likely a homerun.  I think this also removes a lot of the squandering of cash risk as they will need it for this potentially high return project.

3) I do worry that they will waste a bit of money in the food souvenir business.  Their losses have been worse than expected so far and they show no sign of slowing it down in my opinion.  I think its more of a short/mid term risk than a LT risk though as one would assume that CCM will cut his losses eventually given the way he has behaved.

4) Overall, I see this as a stock with decent downside protection and several options for upside (Henqin, F&B expansion/new Cotai casinos, F&B margin normalization, industrial catering expansion, food souvenir business actually works).  If any of them works, then you probably have 100% upside and if multiples work then you start to make a lot of money. 

However, if F&B earnings continue to weaken to 50mln annually from 100mln run rate and you put an 6x multiple on it and haircut cash, property and henqin by 25% (so its actually a negative value project due to required capex), then I think its worth HKD 1.

Thus you have ~30% downside and various shots on goal at 100% and more upside which seems like an attractive risk reward to me. 

Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on March 27, 2015, 09:16:39 PM
The Annual Report 2014 was released yesterday: http://fb.etnet.com.hk/ca-report-e.html
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on March 28, 2015, 02:15:56 AM
From the annual report, outlook section :
"The Group’s current business strategy is to fully capture all the growth
potentials of the food and catering business in the Greater Macau Area
(being Macau, Hengqin Island and certain parts of Zhuhai city). This
strategy would lead to the Group continuing to sustain considerable
labour and rental cost pressures in this year."

The message is loud and clear : this year again will be all about increasing market share and decreasing earnings
This CEO is building an Empire
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on March 28, 2015, 09:20:31 AM
I dont think you can give negative value to Hengqin, that does not make any sense. If the project would be finished today and sold, it would get between 15k and 40k per sqm. So that would mean the project would be valued between 750m-2bn HKD. And this is still a big discount to Macau or HK land values. I dont see how you can give negative value to that ? If it is paid for, and has no net debt?

If you take the 500m$ macau property and cancel out the debt against that, and give it a big discount it counts as zero on the balance sheet.

As for Hengqin. 130m$ is already paid, so they need to pay another 970m$. They will probably sell part of it to a developer. Cash is about 700m$. So Im assuming they spend most of the cash, and get some cash from selling the stake. So they will have a small net cash position since most of the capex investments of opening new places have been made already. They will only open about 20k sqft in 2015.

If you look at net cash from operations, that would be about 200m$ backing out working capital changes and the 40m$ loss on their souvenir business. D&A is about 33m$. So that is 170m$, or about 145m$ in FCF backing out the yellow house.

So if you give 145m$ a 5x multiple, which is extremely conservative and prices in that the business will certainly shrink, assume like 100m$ of net cash, and another 500m$ for hengqin, there is still upside.

And this assumes their food business is fked, and hengqin is a disaster. I dont think 1$ per share is realistic. This really does look like a once in a lifetime, even though the business is not great. Only risk seems to be political, but there is no indication of that.

If you price in any chance of recovery, any chance of hengqin being success, any chance of a win in catering gigs and any chance that their food souvenir can be turned profitable, the shares should trade between 4-8$HKD. Vs 1.4$ now.

Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on April 13, 2015, 06:16:35 AM
Anyone know what happened?  Stock up a ton on significant volume and no readily apparent news...
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on April 13, 2015, 07:37:15 AM
All my hong kong stocks are rallying, so probably has something to do with that. Chinese exchange up a lot as well. And Macau is stabilizing, as numbers in march were a bit better then in february.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Okta on May 04, 2015, 09:33:53 AM
The stock trades in line with Macau casino stocks. I can't explain the huge move today, though. No company specific news.
http://www.bloomberg.com/news/articles/2015-05-04/macau-s-casino-revenue-falls-39-as-china-graft-probes-expand (http://www.bloomberg.com/news/articles/2015-05-04/macau-s-casino-revenue-falls-39-as-china-graft-probes-expand)
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on May 04, 2015, 10:45:48 AM
Not sure either. Related stocks did not show comparable price action. Couple reports came out May 1st, that's all I can see.

http://www.reuters.com/finance/stocks/analystResearch?symbol=0703.HK
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on May 05, 2015, 08:46:29 PM
Interesting to see this second (and welcome) bounce. There seems to be a bit of a rebound for Macau stock, as Paradise Entertainment (also worth a look at its current price) is also doing well.

Based on the recent volume, I assume some hedge funds are positioning themselves for a Macau recovery, with a focus on Macau stocks well positioned to benefit from the China mass market. The April Macau gambling statistics were in line with what market expected (http://macaubusinessdaily.com/Gaming/Dead-Cat-Bounce) and the China State Council also recently released (on 20 April) framework plans for the new Free Trade Zone in Zhuhai/Hengqin - which will benefit FBH. See http://macaubusinessdaily.com/Politics/Big-dreams about the inauguration.

My hunch, however, in respect of FBH, is that discussions must have started with large real estate developers about the co-development of FBH's Hengqin food plaza (which may explain recent volatility). The timing would be right, based on what they mentioned in their last financial statements on that point. This is mere speculation on my part though, so let's wait and see... 
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on May 08, 2015, 08:46:02 AM
Q1 takeaways
Results tough as expected given macau weakness but not as bad as feared.  I was pleased to see positive PBT even when burdened by food souvenir losses, huafa losses and huge declines at their most profitable restaurants.  Hopefully this is what the worst case results look likeas it is really not that bad.

Also pleased with the comment that they are aware of Food Souvenir and Huafa losses and may look to close loss making assets.  I hope this is a message to investors that they will not continue to pour money into a black hole. 

Both factors make me a bit more comfortable in downside protection.  Anyone else have thoughts?
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on May 11, 2015, 02:06:53 AM
Actually, Q1 result is quite a shocker to me . I certainly don't expect the Co to make loss (or barely breakeven).

To me, what is somewhat unexpected about Q1 result is the magnitude of the same store sale decline of -21% (pg 5 of the report, - note this figure excluded the impact of new store opening /start-up cost & the losses of other divisions).
The SSS decline is a lot more severe than the Macau GGR & tourist visit decrease of -14.3% and -3.6% over same period - I am not sure what's the logical explanation here.. 

Even if I add back the HK$11.8m food souvenir loss and the HK$11.7m Huafa Mall, the Gross operating profit would only be 39+11.8+11.7 = 61.5m, still c28% lower than previous year at 84.9m. So it seems the cost may have gone up by 23.4m (not sure what's the breakdown on start-up cost vs opex escalation)?

Also, it seems the Food Souvenir loss has not reduced from last year?
As for Huafa- I recall seeing some discussion on Red's blog that it should somewhat stabilized this year (>6 months since operation), which hasn't been the case.

Clearly if these two losses continue (which seems likely, at least for this year), the margin of safety would shrink considerably..
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on May 11, 2015, 06:14:03 AM
the company has been pretty clear that Q1 of this year would be very bad....not sure why anyone was expecting anything different given continued macau weakness and ongoing investments in food souvenir and Huafa....

With regards to the SSS, the decline is worst in their higher end Chinese and Japanese restaurants.. given the decline in VIP play this was not that surprising to me...

Huafa I think is a 12mth+ ramp up period, not 6.

I think the opportunity in Future Bright (if there is one) is the ability to look beyond the weak 2015 results towards a potential future with greater Macau square footage, Henqin, Huafa, industrial catering and either a profitable or shuttered food souvenir business. The only reason why you get a cheap look at that opportunity is because 2015 is ugly. 

Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on May 11, 2015, 07:15:12 AM
So armageddon basically happens, and they still do fine. Seems margin of safety is not eroding with all those assets on the balance sheet, and a disciplined operator?

If they shut down losing operations, and thing pick up a bit, earnings go over a 100m$ again. Let's see how Heng qin will go.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on May 11, 2015, 10:59:44 AM
Armageddon happens and they make significant investments for the future... and things still aren't that bad...

I agree that the discussion about potentially shutting losing operations was a positive... definitely shows that Chan Chak Mo is focused on profitability and not just growht
Title: Re: 0703.HK - Future Bright Holdings
Post by: Okta on May 11, 2015, 12:04:51 PM
The wording seems honest. The whole thing is called "PROFIT DECREASE WARNING". This reduces my fear of a fraud scheme going on, as large capex projects in Asia seem to be a way to tunel some money away.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on August 07, 2015, 07:01:02 AM
Another profit warning but some positives here.  Company is shutting down Huafa food counters which have been losing a lot of money which I view as a positive because it removes the losses and shows that mgmt is willing to make tough decisions. 

Ex Huafa, Souvenirs, and property business, I see core F&B/Catering/Ingredients business still generating ~22+mln of EBIT in H1 2015 in a pretty horrific Macau environment.   

Assuming net cash hasn't declined too much, net cash + investment prop + Henqin appears to be worth ~HKD 1.65.  8x current F&B/Catering/ingredients EBIT is another 0.50 so HKD 2.15 even in this brutal environment..

Haircut cash & investment property 25% and Hengin 50% and give no value for business and you get to HKD 1.15 or the current share price.  Seems like that should be pretty solid downside protection.

Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 07, 2015, 11:18:45 AM
Q2 2015

I'm getting similar numbers to yours, Whistler. About a 1.76$ MOS after discounting investment properties by 25%, assuming cash hasn't changed much since 2014 AR, calculating about 30% of cash as working capital, returning the rest to owners in a no growth environment. Annualizing depressed earnings of their core F&B biz.  The pretty concrete MOS is likely between 1.30$ and 2.50$--somewhere above today's share price anyways.

Risks
Continued GGR declines which clearly severely affects their core F&B biz.
Continued investments into ventures like Food Court Counters which prove to be unprofitable, draining cash flows from profitable segments (perhaps Hengqin, perhaps Food Souvenirs).


They are ramping up other restaurants that are likely to be profitable, even in this environment. There is a good chance Hengqin will be worth more than BV, operationally down the road. Chance of Macau GGR growth. Chance of greater tourism growth. Chance of industrial catering to win large contracts. There is very real potential for the stock to be worth multiples of its current share price in a short amount of time with a MOS that looks tangible, believable. We'll see.

It will be interesting to see how much cash they have on the interim report and what they do with Food Souvenirs.

I've got 14% in this one.
Title: Re: 0703.HK - Future Bright Holdings
Post by: physdude on August 09, 2015, 04:16:12 AM
I am fairly long (3%) this company and am down nearly 50% but was not too worried given the MoS. However, what has got me worrying is the large decline in the Japanese and Chinese restaurant businesses which I don't think is just because of the Macau slowdown. In particular, the reviews for their Edo Japanese restaurants in Macau on tripadvisor  are horrendous and management doesn't seem to have responded to them. That is quite disconcerting as a lot of their profit currently comes from these restaurants. I am still holding as the risk/reward seems good if management pulls through but their performance is not looking all that good as of late.
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 09, 2015, 04:40:03 PM
I hope they will score some contracts on these new hotels/casino's. That will add up really fast. This possibly happening is not baked in at all into the price right now.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 19, 2015, 12:49:47 PM
No shortage of negative news affecting FB and thus the new 52 week low:

http://macaudailytimes.com.mo/economy-gaming-operators-stocks-dented-by-weakened-chinese-currency.html
http://macaudailytimes.com.mo/gaming-alert-money-laundering-in-goas-casinos-and-the-macau-experience-report.html
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on August 19, 2015, 01:40:40 PM
No shortage of negative news affecting FB and thus the new 52 week low:

http://macaudailytimes.com.mo/economy-gaming-operators-stocks-dented-by-weakened-chinese-currency.html
http://macaudailytimes.com.mo/gaming-alert-money-laundering-in-goas-casinos-and-the-macau-experience-report.html

well, I bought more last night :)
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on August 20, 2015, 07:49:29 PM
I have turned bullish on this one
The ugly conditions I was mentioning in my previous posts have turned for the better.
GGR is stabilizing, Macau policy has turned pro-business, cost side rents/wage stabilizing...overall one last PW and we are done

A quick calculation : f&b/catering = 8 times (Annualized H1 EBIT discounted by 25%) = 0.375 cts
Discounted Henqin/properties/cash = 0.65 cts

Worth 1 in a worst case
Worth 2 if things stable going forward
Worth 3 if business starts growing again
Worth 6 if management becomes shareholders friendly ( closes food souvenir shops, buy back shares at current levels )

do I simplify a bit ? Yes I do but it is really not a complicated case

I've never seen investors that bearish on HK/China in my life ( I work in finance in HK since 2004... )
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 20, 2015, 10:56:54 PM
http://macaudailytimes.com.mo/weak-yuan-stacks-odds-against-flagging-casino-revenues.html

Here's what I think the market sees:

50% of visitors to Macau are Chinese so if there is an economic slowdown there will be less tourists. The government has shown their willingness to crackdown on gambling in Macau. The yuan devaluation will hurt casino revenues.


In reality, China is continuing to grow, even if it's at a more modest rate gong forward, and even with haircuts to land/property, you could liquidate the company for above today's price.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on August 20, 2015, 11:42:21 PM
I agree with the analysis by Heisenberg above. This is very cheap, and they have a sufficiently flexible business model (e.g. by closing non-performing businesses, as they have just done for the Huafa food courts), yet they're priced for liquidation. Their core F&B business remains in a decent shape, in an incredibly tough Macau environment. A slight increase in GGR and the turnover in the high margin Japanese restaurants will improve.

My sense is that the stock is getting caught in the general rout in HK/China and the market is anticipating the announcement that no dividends will be paid this year. The board of directors meeting will take place Monday so we should be getting a further update thereafter. The previous release mentioned "more updated business development" following this meeting.

Any positive news from a food catering or Hengqin perspective could have a big impact. I think building in Hengqin is supposed to start in November.

The risks are: (1) anything relating to their high profile chairman (2) taking the group private whilst its so cheap (3) dilution in order to fund Hengqin.
Title: Re: 0703.HK - Future Bright Holdings
Post by: whistlerbumps on August 24, 2015, 08:10:32 AM
Here is how I calculate pro-forma H1 F&B & Catering EBIT.  I would be interested if others disagree.

GOP - Administrative + Souvenir + Huafa - Property Revenues
67.1  - 75.5 + 31.4 +22.5 -15.1= 30.5

I think this number is important as a way to keep track of the performacne of the core F&B business which can sometimes be hidden by the other moving pieces. 

30mln in H1 is ~60mln annualized.  At 6x EBIT = 0.52 per share.  + Cash (0.13 @ 25% haircut) + investment prop (0.58 @ 25% haircut)= 1.22 at depressed results and pre Henqin.

Or another way, Cash + Investment prop + Henqin (0.20 @50% haircut) = 0.91 with no value for the core business...

Obviously price can go anywhere in times like these but seems like value is pretty well protected above current levels.

I would be very interested in any disagreements with this analysis.


Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 24, 2015, 08:21:07 AM
What a slaughterhouse. I think the only way to lose here is if this is somehow a fraud. Gambling industry usually proves pretty resilient. If I could id load up a lot of shares at these prices.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 24, 2015, 05:07:08 PM
Management backs out Souvenir loss of -22.6 and "new restaurants and food court at Huafa at -22.5" on page 24 interim. So if we are trying to calculate profitability of core, we should be excluding both the new restaurants and food court counters, imo. There are other restaurants being ramped up, and that will take at least a year so I believe core profitability should be higher.

Another way to assess core profitability is SSS. It seems like it was trending towards 5500 rev/sqft or better in previous releases but H1 2015 is considerably lower. Based on their 297.3 H1 SSS from pg.22 and their previous footprint of 142,463 sqft (pg.28) in June 2014, it would suggest rev/sqft is 4173 annualized. But I'm not sure the 142,463 is what the SSS footprint is referencing. However, the footprint would be lower not higher so the rev/sqft should be at least that high.

Also, they went from 142k sqft June/14 to 277/k sqft June/15. We could approximate a MOS in earnings based on 4000 rev/sqft and guessing whatever footprint is core. It's above 144k and perhaps below 277k.

In 2012 they had 130k sqft and did 122m NOOP.  That's 1.41$/share with an 8x multiple before assessing investment properties and the 140k sqft of other F&C.
Title: Re: 0703.HK - Future Bright Holdings
Post by: chai on August 25, 2015, 05:00:37 AM
My biggest concern is that we may not yet see the bottom of the GGR drop. GGR adjustment could very well be a structural re-alignment and therefore you would not see a cyclical rebound in near-medium term.
Also, what if the mass GRR/ # of visitors  starts to decline, given the negative wealth effect from the current market rout?
Given the high fixed cost nature of the restaurant business, we could start to see real operational losses. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: yadayada on August 25, 2015, 06:26:01 AM
http://corpsv.etnet.com.hk/webservice/jsp/ETNET/CorpAn/eng/detail.jsp?VERSION=ENG&DOCCD=83724

What the hell is this? You gotta send papers to some hong kong office to get the dividend?
Title: Re: 0703.HK - Future Bright Holdings
Post by: constala on August 25, 2015, 06:59:01 AM
http://corpsv.etnet.com.hk/webservice/jsp/ETNET/CorpAn/eng/detail.jsp?VERSION=ENG&DOCCD=83724

What the hell is this? You gotta send papers to some hong kong office to get the dividend?
Yadayada, I had a similar language on a recent series of dividends( interim, final, exceptional, shares distributions free of charge) from 201:HK and it went through just fine, there was no need to act....
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on September 02, 2015, 10:00:31 AM
http://www.gamingtoday.com/articles/article/55497-Macau_gambling_revenue_slide_continues#.VecnYpdRKVL
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on October 02, 2015, 07:09:03 PM
http://www.bloomberg.com/news/articles/2015-10-02/wynn-leads-casinos-rise-as-china-signals-new-support-for-macau

Also noticed today that the Macau government rented out a section of Grand Central Station this week to spread tourist information about Macau. There were several booths setup discussing various tourist spots there and they were giving away some pretty high quality guide books. -- Good to know they are doing something to increase tourism.
Title: Re: 0703.HK - Future Bright Holdings
Post by: physdude on November 13, 2015, 01:11:51 AM
Any views on the latest quarterly report? The 3Q loss was very small so looks like that they are close to breakeven now.
Title: Re: 0703.HK - Future Bright Holdings
Post by: 60°North Investments on November 13, 2015, 01:35:06 AM
Not bad I would say. Same-store sales were -1.4% without industrial catering and +1.4% with industrial catering included, so things aren't falling off the cliff in the core food&catering businesses, as the share price would make one think. Think this will look very different with clean FY2016 numbers, assuming they don't take up any huge new projects like Huafa. And even though it burned cash and didn't work, they exited quickly and without damages that'd make a huge difference if you look past one year.

Next year, when Huafa losses aren't showing in the P&L and assuming the food souvenirs business doesn't bleed outrageously (some good actions taken there as well, for example moving to smaller kiosks from stores) and core business continues as is, they'll show a nice result especially for this price. Plus, there's lots of cash, properties net of debt, Hengqin land and other smaller things that are worth double the current price. But the market seems very focused on the headline results now which don't look that great when you have the Huafa losses and the food souvenir issues too.
Title: Re: 0703.HK - Future Bright Holdings
Post by: physdude on December 04, 2015, 04:28:52 AM
For anyone following this, does anyone have any clue as to why the volume has essentially dropped to zero (even my piddling position is many times today's volume for eg.)? I can understand the sellers not wanting to let go at this absurd price but there don't seem to be any buyers as well (it is a full size position for me already).
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on March 23, 2016, 10:18:33 PM
Following the release of their 2015 results, FBH's stock price is currently rerating. Their market cap at the moment is equivalent to the value of the office in Hong Kong and the building in Macau that they own. Assuming Macau sentiment stabilizes then I could see FBH's share price doubling from here if:

1. They continue to focus on mass market (as announced in the FS, e.g. with 3 new restaurants in Hong Kong).
2. They find a partner for the Hengqin development (as hinted at in the FS), or delay the building.
3. The initial investment in getting the new food souvenir business off the ground reduces and they finally break even. They have clearly revised their strategy by opening smaller shops/kiosks. This gives them more flexibility to adjust their sales strategy.

The results in the last 18 months have been impacted by the general Macau sentiment (especially the expensive Japanese restaurants in the casinos), heavy investments in the food souvenir business and some mistakes (mainly the 19 food courts in Huafa mall – now closed), but they have amended their strategy to focus on mass market. Their valuation looks very cheap when stripping out these non-recurring expenses.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on March 24, 2016, 08:00:11 AM
Good post. I hold a large position that is underwater. It's a position I will likely just hold for a few years until it drastically re-rates.
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on March 24, 2016, 11:46:21 PM
One can wonder if it is timely to open 3 restaurants in HK...there are now more restaurants closing than opening in HK for the first time in a while. Commercial rents are among the highest in the world and Chinese tourists ( = the mass market ) are shifting their holidays habits toward Japan ( cheaper JPY makes shopping more interesting there )

They would be better off opening restaurants in Niseko

I'm not impressed by the management to say the least : they make many mistakes and don't have any plan to reward the shareholders through buy backs. Empire builders they are.

So I don't see any rerating while they are in place and if the market cap is equivalent to the value of their building why don't they offload them quickly at 10% discount then buy-back shares ?
Title: Re: 0703.HK - Future Bright Holdings
Post by: 60°North Investments on March 25, 2016, 12:10:26 AM
I'm not impressed by the management to say the least : they make many mistakes and don't have any plan to reward the shareholders through buy backs. Empire builders they are.

So I don't see any rerating while they are in place and if the market cap is equivalent to the value of their building why don't they offload them quickly at 10% discount then buy-back shares ?

Problem with buybacks is that if they bought back more than a few %, CEO CCM would have to make an offer to buy the whole company (I think there was a 2% threshold, if breached -> CCM has to make an buyout offer). According to them, that's not something they want to do. And if it was, I'd imagine they would have already bought the company.

I agree with the new openings though in the sense that it might be better to focus on existing operations first, for example by nailing the partnering of Hengqin. They obviously know the restaurant landscape better than I do, so I sure hope they see the new openings as great opportunities. Still, there's a lot more room for this to run if it starts trading on the fundamentals some time again.
Title: Re: 0703.HK - Future Bright Holdings
Post by: heisenberg on March 25, 2016, 08:20:29 PM
if not buy backs, i'm sure shareholders would settle for a dividend of 90% of the stock price ( dividends are tax free in HK ) and re-invest the proceed in buying the stock if they feel for it

 :)
Title: Re: 0703.HK - Future Bright Holdings
Post by: ccplz on July 18, 2016, 03:59:37 PM
Does anyone know what happened with the 3 restaurants and food court counters in Huafa mall, and what is being impaired for that business as well as the food souvenirs business?

There doesn't seem to be much color in the filings.
Title: Re: 0703.HK - Future Bright Holdings
Post by: ccplz on July 18, 2016, 10:00:55 PM
I don't think their piece of land on Hengqin will turn out to be worth anywhere close to the ~300m HKD they paid for it...
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on August 10, 2016, 06:40:25 PM
This is rerating quickly, with some very large volumes, in expectation of decent H1 results in the new few weeks showing that they have finally turned the corner.

Macau's GGR is expected to finally show some growth in September after a slide of over 2 years.
Title: Re: 0703.HK - Future Bright Holdings
Post by: ccplz on August 11, 2016, 04:02:47 PM
http://www.hkexnews.hk/listedco/listconews/sehk/2016/0811/LTN20160811875.pdf
Title: Re: 0703.HK - Future Bright Holdings
Post by: awindenberger on February 25, 2017, 09:06:15 PM
Anyone on the board still invested in or considering investing in Future Bright? I came across a pitch for this elsewhere and after a bit a financials reading it looks interesting. Seems like the business might be ready to return to profitability in 2017.
Title: Re: 0703.HK - Future Bright Holdings
Post by: constala on February 26, 2017, 08:08:12 AM
Yes I am a long term holder and I met with management. Valuation is unchallenging but both upside (runway not obvious, they have no moat and no focus only ok locations) and Margin of Safety (Yellow House/Henquin) have diminished.  The company made too many mistakes and acknowledges them, but is now paying the price of their uncontrolled/excessive ambitions and expansion plans (Food Souvenir, too many openings, Henqin..)  Beta wise Macau GGR are turning the corner and found bottom. This should help. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: awindenberger on February 26, 2017, 08:41:34 AM
Yes I am a long term holder and I met with management. Valuation is unchallenging but both upside (runway not obvious, they have no moat and no focus only ok locations) and Margin of Safety (Yellow House/Henquin) have diminished.  The company made too many mistakes and acknowledges them, but is now paying the price of their uncontrolled/excessive ambitions and expansion plans (Food Souvenir, too many openings, Henqin..)  Beta wise Macau GGR are turning the corner and found bottom. This should help.

Thanks. Its good to hear that management knows and accepts that they've made a bunch of mistakes.

It seems to me that the completion of the Macau - HKG bridge is going to be a big boon to Macau. I remember when I visited a couple years ago it was annoying and expensive to take the water taxi over from HKG. The bridge should allow more people to come visit.

Even given all the issues, is my initial view that the stock is worth conservatively at least 2-3x more in the ballpark of your valuation? Obviously the timing could take awhile, but I want to make sure I'm not missing anything massive.
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on May 17, 2017, 11:33:25 PM
Yes I am a long term holder and I met with management. Valuation is unchallenging but both upside (runway not obvious, they have no moat and no focus only ok locations) and Margin of Safety (Yellow House/Henquin) have diminished.  The company made too many mistakes and acknowledges them, but is now paying the price of their uncontrolled/excessive ambitions and expansion plans (Food Souvenir, too many openings, Henqin..)  Beta wise Macau GGR are turning the corner and found bottom. This should help.


constala, why do you see the margin of safety with regard to Yellow House and Henquin as diminished?
TIA.
Title: Re: 0703.HK - Future Bright Holdings
Post by: constala on May 18, 2017, 01:53:16 AM
Margin of safety indeed quite reduced: tangible real estate assets were about 1.10per share but both should be heavily discounted now. (firesale likely if cash crunch).
Yellow House is without tenant since Sep 16 (early breakage-tenant was supposed to stay until end Jan 18).  This was an annual income of @28m supporting the Value of HKD 500m/550m.=@0.72per share
Hengqin Land: still valued close to acquisition cost at HKD 267m=@0.38 per share: still no development partner, and worse, they were under investigation by the local authority for idle land with possible penalties of 20% acquisition costs per year. This was resolved in May in their favour, but the development partner, and financing of the project,  is still to be found.
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on May 20, 2017, 05:05:38 AM
Thanks. Each on its own is minor, but both together suggest something about management.  They keeps closing and opening restaurants, and it feels like the equivalent of overtrading - every change creates a drag on returns and adds to FB's sunk costs. Any insight as to why they're doing it? Any guess as to why they haven't partnered with anyone yet over the Hengqin construction work?

On the plus side, the bridge should be opened by December. And the casinos are up 250% from the bottom, so it seems timely to roll on the gains into companies which are expected to benefit from the ripple effect.


Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on May 20, 2017, 08:35:38 AM
It's clearly been a slow and painful turnaround, not helped by the structurally loss making food souvenir business as well as the failures of all the restaurants in the Huafa Mall. All in all the business is recovering but the problem is that the margins remain poor, and the question is whether this is temporary (due to opening new restaurants) or permanent (due to inflation in Macau). This is especially concerning when I hear of management considering expansion into Taiwan when they have no base or presence there that I am aware of, which will again increase costs significantly.

For me the crucial change to watch for will be the introduction of their new central kitchen and logistics center. The latest update said the center was nearly completed. This may help them to be more efficient for the food preparation and to finally increase their margins. The other question being whether this will enable them to win some industrial catering contracts (see http://quinzedix.blogspot.hk/2014/07/future-bright-part-2.html for a little more about the opportunity) which would be a big bonus. 

The investment in the development of the Jia Jing food court in Hengqin (http://www.zhsswj.gov.cn/en/NewsCenter/News/201702/t20170206_16091376.html) may also delay the payment of a dividend for some time (even if they find a co-investor), which reduces the likelihood of a rerating.
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on May 20, 2017, 11:02:42 AM
Thanks for the links.  If business owners are incapable of profiting from core dining operations, they should probably not be relied on to succeed in real estate. Their growth efforts on both ends have so far destroyed value, even with current GGR tailwinds, and that's telling. 
What do you think is stopping them from scaling down the losing part of the operations, and from finding a developer for Hengqin?
You guys seem to understand the business quite well, I would love to get your insights on that. FB doesn't seem to have the funds or expertise to go solo.

On the other hand, valuation is compelling, and the rate of cash burn is minimal. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on July 02, 2017, 09:44:19 AM
June's GGR up 26%:
https://www.ggrasia.com/macau-casino-ggr-up-nearly-26pct-in-june-govt/
See also the attached article form Barron's.

I ran some regressions between GGR and FB's results during 2013-2016 [GGR and YoY change in GGR as explanatory variables, and as dependent variables, each of the following: FB's gross margin, operating margin, net profit and same store sales]. Adjusted-R was around 0.6 for each of them. So GGR is strongly correlated with the company's performance, and the change is evident quarter by quarter.

The Bridge should open soon, so land value can appreciate quickly. The central kitchen should be done, finally turning from a burden into asset.

It seems like good optionality - If results indeed turn positive with GGR, as the regressions predict, the stock should go up >25%. If results stay the same, price will most likely stay where it is. There seems to be very little risk. Now that I wrote that, the stock will probably halve  8)
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 28, 2017, 10:37:51 AM
Management is always intent on expansion "The Group’s current business strategy remains to be to cautiously open new restaurants or food souvenir shops to generate more revenue with a focus more on mass market restaurants. Management is currently looking for opportunities for opening new restaurants and food court counters in Macau, and is cautiously expanding its mass market restaurants in both Hong Kong and Mainland China in the next two years. The Group is also exploring the viability of cautiously expanding its mass market restaurants into the Taiwan market."

So more Food Souvenir shops even while their results have been terrible. And expansion to another country when the results within their own border have been terrible. Meanwhile they are without renters of their rental properties and still committed to their large investment project in Hengqin. 

It's hard to have faith in management.

Thoughts?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on September 25, 2017, 02:18:31 AM
Some encouraging signs from Hengqin, where FB has its development property: http://www.scmp.com/news/china/economy/article/2111534/how-china-creating-its-answer-floridas-orlando-island-near-macau
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on October 15, 2017, 10:50:23 PM
Does anyone know why management has failed to lease the Yellow House - supposedly prime Macau real estate - for more than 13 months, since Forever 21 terminated the lease?

I am shocked that this appears to still be vacant and makes me question whether management are truly trying to turnaround the business or are looking for a cheap take private.

I'd be interested in other people's thoughts, especially as I saw some comments saying that they had spoken to management a few months ago. 
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on May 21, 2018, 01:16:35 AM
This stock seems to be finally rerating. Some catalysts:

1. (Potential) Sale of part or all of Hengqin as per the recent trading update.
2. A potential new tenant for Yellow House, which they are finally “actively searching” per the last two updates to the market (see my previous rant above).
3. The new logistics centre coming on in June. This may help control food preparation costs and also bids for canteen contracts (eg for casino workers, though I am not sure how likely this is).
4. Food Souvenir division finally nearing breakeven.
5. Completion of Macau-HK bridge and continuing good numbers for Macau GGR, which is reflected in the valuation of larger groups with Macau exposure but not reflected in FB’s valuation.

On the negative, the company seems to really struggle controlling costs, but good that numbers are improving.
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on August 26, 2018, 09:16:51 AM
H1 2018 report is out.
On the operational side, Sales and EBITDA are up (22% and 31%) but with no operating leverage the bottom line remains Net Loss.

On the property development side, management is finally showing some transparency.  Rather than looking for partners, they plan to sell 100% of Hengqin Land Project, within 12 months, and with net proceed exceeding book value. They even indicate the range, around 60% above book value, which results in about 672m. With that in cash, and the rest of the company trading at x0.5 BV (=250m), we should see 1.33 per share, which is indeed where the stock traded a few weeks back when a finalised sale was rumoured.

Of course, the negotiations could fail, but at some point they should find a buyer, so it seems to be more about IRR than ROI.

Title: Re: 0703.HK - Future Bright Holdings
Post by: serendibz on August 26, 2018, 11:01:37 PM
H1 2018 report is out.
On the operational side, Sales and EBITDA are up (22% and 31%) but with no operating leverage the bottom line remains Net Loss.

On the property development side, management is finally showing some transparency.  Rather than looking for partners, they plan to sell 100% of Hengqin Land Project, within 12 months, and with net proceed exceeding book value. They even indicate the range, around 60% above book value, which results in about 672m. With that in cash, and the rest of the company trading at x0.5 BV (=250m), we should see 1.33 per share, which is indeed where the stock traded a few weeks back when a finalised sale was rumoured.

Of course, the negotiations could fail, but at some point they should find a buyer, so it seems to be more about IRR than ROI.

I can't seem to find in the interim results where it is mentioned the range of value they expect to get from the land sale. Can you kindly point out?
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on August 27, 2018, 02:13:09 AM
Comment 17. p.21 (copied below) - See the language they use below to draw a very clear parallel and with specifically invoked figures:


"The assets and liabilities attributable to the subsidiary, which is expected to be sold within twelve months, have been reclassified as assets/liabilities held for sale...net proceeds of disposal are expected to exceed the net carrying amount of the relevant assets and liabilities and accordingly, no impairment loss has been recognised...On 1 December 2017, the Group entered into a preliminary sale and purchase agreement to dispose of the leasehold land and building amounted to HK$32,429,000 which was classified as property, plant and equipment before the agreement was entered into. Such property was classified as held for sale as at 31 December 2017 and no impairment was made as the directors of the Company expected that the fair value (estimated based on the agreed price in the agreement) less costs to sell would be higher than the carrying amount. During the Period, the Group disposed of such property at a consideration of HK$52,000,000"


Title: Re: 0703.HK - Future Bright Holdings
Post by: serendibz on August 27, 2018, 05:39:03 PM
Comment 17. p.21 (copied below) - See the language they use below to draw a very clear parallel and with specifically invoked figures:


"The assets and liabilities attributable to the subsidiary, which is expected to be sold within twelve months, have been reclassified as assets/liabilities held for sale...net proceeds of disposal are expected to exceed the net carrying amount of the relevant assets and liabilities and accordingly, no impairment loss has been recognised...On 1 December 2017, the Group entered into a preliminary sale and purchase agreement to dispose of the leasehold land and building amounted to HK$32,429,000 which was classified as property, plant and equipment before the agreement was entered into. Such property was classified as held for sale as at 31 December 2017 and no impairment was made as the directors of the Company expected that the fair value (estimated based on the agreed price in the agreement) less costs to sell would be higher than the carrying amount. During the Period, the Group disposed of such property at a consideration of HK$52,000,000"

The leasehold land was classified at cost less depreciation, hence there may be some gap between its book and market value. The Hengqin land was carried as investment property (market value) before being reclassified as assets for sale. I would not expect its sale value to be as high as 60% above carrying value.
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on August 28, 2018, 02:13:02 AM

The leasehold land was classified at cost less depreciation, hence there may be some gap between its book and market value. The Hengqin land was carried as investment property (market value) before being reclassified as assets for sale. I would not expect its sale value to be as high as 60% above carrying value.

Yes, cost - depreciation + leasehold improvements, that's a good point. Yet Hengqin value is discounted at ~12% on average (7%-16%), x3 the discount rate for the Yellow House. As the construction progresses, FB reduces those initial risks, thus increasing value merely through compliance with the initial estimates.
Which price do you expect?
Title: Re: 0703.HK - Future Bright Holdings
Post by: mrbrown82 on September 29, 2018, 01:21:54 AM
I don't think the footnote meant discount RATE of 7% -16% but a discount of 7-16% to comparables transaction. It is not to be confused at the 4% "reversionary yield" (discount rate) for the Yellow house.  I think at best we can see a final price of 20% higher than the latest net carrying value (which itself is subject to periodic remeasurement).
Title: Re: 0703.HK - Future Bright Holdings
Post by: LightWhale on September 29, 2018, 03:11:53 AM
I don't think the footnote meant discount RATE of 7% -16% but a discount of 7-16% to comparables transaction

Thanks, a good correction.
Since fair value estimate is 3rd level (no proper comparable transactions exist), what do you base the ~20% premium on?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on January 23, 2019, 11:09:14 PM
Has anyone been following the group recently? They clearly overextended themselves with their real estate ventures (Yellow House empty for over a year, development in Hengqin) and food souvenir business. 

The business park in Hengqin where the development is located was criticized by the Macau government over the summer: http://www.macaubusiness.com/macau-traditional-chinese-medicine-park-houses-25-local-companies/, so it may be difficult to sell it until the park has actually shown promise...

On the other hand, they have done well in Hong Kong, opening an 18,000 sq ft food court in the new high speed West Kowloon train station to China: https://www.scmp.com/news/hong-kong/hong-kong-economy/article/2167335/owner-hk35-million-food-court-west-kowloon-station

They've also won, per the 2017 FS, the food counters contracts for the K11 Musea project (https://www.k11musea.com/en/) opening this year in the center of Hong Kong. It's good that they seem to be winning contracts in large scale projects in Hong Kong, so must have built their profile in HK.

Still I'd like to see their share price reflect the potential, possibly after they have finally dealt with Hengqin and got the food souvenirs business to break even.

I'd be keen to hear the thoughts of anyone still following them.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on January 29, 2019, 06:34:54 PM
I invested in FB early 2015 and remain invested. It is the largest loss-maker in my portfolio, but I remain patient.

An unexpected disruption to the company's business started in 2014 with the Chinese government starting a campaign to fight corruption on all levels. Officials and business people, whether corrupt or not, don't want to be seen spending money in Macau. Visitor numbers to Macau dropped dramatically. FBs poor performance in the catering and food souvenir business were a result of this development. The lack of interest in the Hengqin development and Yellow House probably too. All these projects were started before 2014. In retrospect, very unfortunate, but I do not consider it as proof of FBs management incompetence.

If FBs sales would lag behind the visitor arrivals in Macau, that would worry me a lot more. However, both remain strongly correlated as pointed out earlier in this forum. Hence, I am waiting for the tourist arrivals to recover. Is it realistic to expect such visitor growth? I believe so, because of a few longer term trends:


Next week is Chinese New Year, which is traditionally followed by a peak in casino visits. This means, we will soon get some indication about the appetite to visit Macau again. Gong Xi Fa Cai !
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on January 29, 2019, 09:47:18 PM
I invested in FB early 2015 and remain invested. It is the largest loss-maker in my portfolio, but I remain patient.

An unexpected disruption to the company's business started in 2014 with the Chinese government starting a campaign to fight corruption on all levels. Officials and business people, whether corrupt or not, don't want to be seen spending money in Macau. Visitor numbers to Macau dropped dramatically. FBs poor performance in the catering and food souvenir business were a result of this development. The lack of interest in the Hengqin development and Yellow House probably too. All these projects were started before 2014. In retrospect, very unfortunate, but I do not consider it as proof of FBs management incompetence.

If FBs sales would lag behind the visitor arrivals in Macau, that would worry me a lot more. However, both remain strongly correlated as pointed out earlier in this forum. Hence, I am waiting for the tourist arrivals to recover. Is it realistic to expect such visitor growth? I believe so, because of a few longer term trends:

  • The Chinese government seems to maintain Macau's status as the gambling monopoly within greater China.
  • Macau is being repositioned as a more wholesome and family-oriented offering, where gambling is only part of the overall experience.
  • Most Chinese citizens have not visited Macau yet, while gambling is widely accepted within Chinese culture.
  • Connectivity to and within Macau is being improved.

Next week is Chinese New Year, which is traditionally followed by a peak in casino visits. This means, we will soon get some indication about the appetite to visit Macau again. Gong Xi Fa Cai !

Don't forget to add the opening of the Zhuhai Bridge to your list of potential catalysts. I've been holding a bit of this for a while as well.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on April 19, 2019, 11:26:41 AM
I appreciated reading Genyi's thoughts. I've also held for several years, but am not sure what to think now given the results of the Souvenir stores, Henqqin, and the vacant rental property. Admittedly, I was being hand held by convincing analysis from The Red Corner Blog, but the radio silence from there adds to my insecurity on this one.
-Tom
Title: Re: 0703.HK - Future Bright Holdings
Post by: mrbrown82 on April 23, 2019, 12:46:46 AM
At current share price (at around 0.4x P/B), it seems like the market has priced in (a) continued vacancy of the Yellow House; (b) continued loss of food souveniers; (c) continued dismay performance of food and catering business; or, (d) a right issue which would be highly punitive and dilutive - but perhaps out of no choice, so that the Company has the funds to meet the remaining developmental obligation of Hengqin by 2021, shall the current sales plan does not materialise.

I am less concerned about (a) to (c) given the turn in general improvement in market -- especially if one is to take a medium term of over 2-years. As long as they are disciplined in their expansion -- a big if, I know, but I am hopeful they have learnt their lessons especially after Huafa, the business should finally stabilise.

The Hengqin appears to be the least predictable and most problematic as it is clearly an area where the Management has zero expertise and experience (and I am not sure why they never bother to at least hire someone with the relevant operational experience). Why would any informed buyer (lest an experienced developer that could bring this to closing line) pay anything remotely closer to fair market value as currently ascribed to its book - when (1) this seems a challenging site with multiple issues from the start; (2) there is a race against the completion timeline which is ticking every day; (3) a seller with weak position and not much other option?

Lastly, would be grateful if anyone who has access to the report below share some of its highlights:
https//www.smartkarma.com/insights/is-there-still-a-bright-future-for-futurebright
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on April 23, 2019, 08:38:52 AM
I'd enjoy reading those reports but an expensive paywall.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Golden Geezer on May 19, 2019, 10:39:21 PM
Hello - is anyone going to the AGM? I think it's tomorrow, it'd be interesting to hear if they have anything to say about their poor performance.

I note that they have yet to release their Q1 trading update, which they generally send out before 15 May, maybe they will send it out tonight before the AGM.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on May 31, 2019, 07:44:11 AM
Any info on how the AGM went?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on June 05, 2019, 08:03:59 PM
https://asia.nikkei.com/Spotlight/Cover-Story/After-a-15-year-hot-streak-Macao-s-casino-owners-may-have-to-pay-up

A good article about the challenges that the Macau casino's are currently facing. The attempts to diversify tourism away from just gambling, seem to be failing. This is bad news for FB's souvenir stores, Hengqin, and Yellow House properties.

Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on June 05, 2019, 08:25:19 PM
Concerning Future Bright Holdings itself: the Q1 2019 results have been released. Unfortunately, not that good. The report also has an update on the Hengqin Island development project. The outlook here is not good either, but at least we are finally getting some details about what is going on.

http://innovo.etnet.com.hk/eng/ca_calendar.php
Title: Re: 0703.HK - Future Bright Holdings
Post by: 60°North Investments on June 06, 2019, 06:32:02 AM
Based on FY18 numbers, with today's market cap of 305M and 650M or so EV, you get in the balance sheet 500M Yellow House property, 470M Hengqin project, 100M cash and 350M or so debts. Obviously they aren't likely shutting this down, but just a quick way to look at valuation. If Yellow House and Hengqin are worth together at least 500M then today's market cap would be "covered".

Still, the company doesn't seem to be able to make things happen and the comments on Hengqin weren't really encouraging either.

Anyone with more positive thoughts?
Title: Re: 0703.HK - Future Bright Holdings
Post by: investor-man on June 06, 2019, 07:03:28 AM
https://asia.nikkei.com/Spotlight/Cover-Story/After-a-15-year-hot-streak-Macao-s-casino-owners-may-have-to-pay-up

A good article about the challenges that the Macau casino's are currently facing. The attempts to diversify tourism away from just gambling, seem to be failing. This is bad news for FB's souvenir stores, Hengqin, and Yellow House properties.

The article feels ill-timed given the Zhuhai Bridge hasn't even been open for a full year (it doesn't even mention the bridge). To me opening the bridge marks the beginning of Macao's transformation to a more "Las Vegas-style" destination. But... owning this company for the last 3'ish years has certainly made me appreciate Buffett's suggestion that "quality at a fair price" is the best option. Frustrating.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on August 10, 2019, 11:33:38 PM
The Yellow House has been rented out for 8 years !

https://innovo.etnet.com.hk/eng/ca_calendar.php

On this link, you will also find a new loss alert for the quarter ending 30 june 2019. The loss for the second quarter is 52.1 HK$’million, of which 21.1 is a net fair value loss in the valuation of the Yellow House. (It is not clear if this devaluation was done in response to the new tenant agreement, or had been established already before that).

The restaurant operation results show a mixed picture. They provide many statistics in the loss alert. In my opinion, it does not look good, however not terrible either.

At the end, more details about the Hengqin Island property are provided. Nothing concrete here, but there seems to be some movement at least.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on August 13, 2019, 07:55:26 AM
Thanks for that.
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on October 28, 2019, 09:13:45 PM
The Hengqin development has been sold !

https://innovo.etnet.com.hk/eng/ca_calendar.php

This is an enormous relief in my opinion. Many details in the linked document on that page. Let me focus on the bigger picture with an earlier quote from the forum...

This stock seems to be finally rerating. Some catalysts:

1. (Potential) Sale of part or all of Hengqin as per the recent trading update.
2. A potential new tenant for Yellow House, which they are finally “actively searching” per the last two updates to the market (see my previous rant above).
3. The new logistics centre coming on in June. This may help control food preparation costs and also bids for canteen contracts (eg for casino workers, though I am not sure how likely this is).
4. Food Souvenir division finally nearing breakeven.
5. Completion of Macau-HK bridge and continuing good numbers for Macau GGR, which is reflected in the valuation of larger groups with Macau exposure but not reflected in FB’s valuation.

On the negative, the company seems to really struggle controlling costs, but good that numbers are improving.

It took a while, but it looks like all these 5 catalysts have now been realized. Not that I am ecstatic: the visitor arrivals to Macau are stabilizing and the visitors are spending less per visit. But it seems that the major headaches for FB are out of the way and the management can focus on opening/closing the right restaurants at the right locations.


Title: Re: 0703.HK - Future Bright Holdings
Post by: yzstevie on October 29, 2019, 12:07:42 AM
What is the reputation/track record of the largest shareholder?  For HK small/micro caps the biggest risk is always the controlling shareholder killing the company through often undisclosed connected transactions...
Title: Re: 0703.HK - Future Bright Holdings
Post by: Laxputs on April 07, 2020, 07:55:54 AM
Will FB make it through? They've had the toughest of times with the Macau gambling slowdown, the HK protests, the China-US tensions, and now the most severe: Covid.

Selling the Hengqin development in Dec 2019, and getting a tenant signed to start paying April 2020 for their lease property are positives. But I have no idea how they'll fare.

Thoughts?
Title: Re: 0703.HK - Future Bright Holdings
Post by: Genyi on June 17, 2020, 04:35:30 AM
Will FB make it through? They've had the toughest of times with the Macau gambling slowdown, the HK protests, the China-US tensions, and now the most severe: Covid.

Unfortunately, FB didn't release any details on the situation so far, making it impossible to make a guess whether the business is still a going concern. But yesterday, they released a Loss Alert and provided some additional financial data with it. There is no full P&L, Balance Sheet nor Cashflow statement but the document is useful enough to check out. I might type some comments on it later.

Quote
Selling the Hengqin development in Dec 2019, and getting a tenant signed to start paying April 2020 for their lease property are positives. But I have no idea how they'll fare.

From the loss alert: the Group’s investment property in Macau has generated steady rental income in the First Quarter and will continue to be so.

No issues here, which is a positive surprise to me. I assumed that whoever took the lease would be in the retail business and hence in a difficult profit/cashflow situation. If someone here lives in Macau, or knows someone there: a personal observation of how the building is used right now might be useful (“S. Paulo”, Largo da Companha de Jesus N°2, Yellow House on the right side where the stairs towards the St. Paul ruins start).