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General Category => Investment Ideas => Topic started by: yadayada on March 01, 2014, 09:03:15 AM

Title: 0184.HK - Keck Seng Investments
Post by: yadayada on March 01, 2014, 09:03:15 AM
It looks really cheap at face value. Looking at how much cash it generates, at their property values and their cash stash. Not sure what the catch is here?

They own and develop properties in hong kong thailand singapore and Macau and the US. FCF yield is like ~20%. But they had a drop in revenue in 1st half 2013 so far.
Title: Re: Keck seng investments - 0184
Post by: king888 on March 01, 2014, 09:18:42 AM
They don't have property in Thailand . They own Sheraton Saigon (Vietnam) which is bith hotel & casino.
The litigation with this casino and player had been a drag to share price for many years. The lawsuit was dismissed last year , not sure if the play can still appeal.
Will Thrower of Global VI board has followed this company for 2-3 years . You can check his long in that board thesis http://investorshub.advfn.com/boards/read_msg.aspx?message_id=95561211

I have a small position since last year . My long case is it's legit with good dividend and was trading at discount to nav and the lawsuit was non-sense ( Player claimed to win jackpot from slot machine's malfuncion)
Title: Re: Keck seng investments - 0184
Post by: yadayada on March 01, 2014, 09:24:12 AM
yeah got them switched up your right. And it looks like they will pay v large dividends soon, now that they paid off most of their debt?  Is the law suit the only reason it was cheap? Price didn't really jump up after that announcement.
Title: Re: 0184.HK - Keck Seng Investments
Post by: rayfinkle on March 02, 2014, 08:01:58 AM
Any governance issues to think about?
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on March 22, 2014, 04:26:59 PM
It seems insiders own a large amount, and what about those minority interests? Half the dividends go their way. I also cant figure out why they have almost their market cap in cash. What will they do with that?

If minority interests get those dividends, does that mean there are like private preferred shares for this company? And what % of the assets do regular equity holders really own then?

Only like 1/6th of the profits went to shareholders through dividends.  They generated roughly 2 billion in cash the last 8 years or so. But most of it is just in bank deposits now still on their balance sheet. You would think they should buy back some of their own shares.

Does anyone have acces to the VIC write up?

They did do some serious investments in real estate in 2009-2011. So i wonder what that is worth now.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on April 12, 2014, 04:44:20 AM
To be compliant with IFRS they need to perform annual RE appraisals on their properties so the book value of equity should reflect any increase in value.  I don't understand the VIC posting as it writes up the already IFRS adjusted book value based upon recent transaction (pretty speculative unless you are RE appraiser).  If you use the IFRS numbers you come up with a discount of 43%, pretty typical of HK real estate hold cos.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on April 12, 2014, 06:05:43 AM
yeah i think your right. They didnt make a significant gain on sale when they sold alot of real estate, like the VIC article implies. So the book value of 3.4 billion should be roughly correct. Still not a bad pick to invest in tho, but i guess not nearly as much upside.
Title: Re: 0184.HK - Keck Seng Investments
Post by: thefatbaboon on April 12, 2014, 06:26:08 AM
The main uncertainty is regarding the value of the macau assets - which I think do have the potential to be significantly higher than their book/ for example they sold two apartments there during 2012 or 2013 at a good clip over book

As regards the minority interests you mentioned earlier it is predominantly the two Vietnamese hotels where they own 64% of the Sheraton and 25% of the Caravelle

The big sale you mentioned where they only realized a small gain was of two properties in Japan/  They had only bought the properties in 2010/ I think the sale was either lucky or clever because they got out just before the yen revaluation and with a small gain

They made an excellent purchase of the W hotel in san francisco in the summer of 2009/

Other than a small run in with the tax man decades ago the controlling family is typical wealthy singapore with a history of working together with some other big and reputable families in singabpore and hong kong i.e. this doesn't look anything like a typical fraud

I have no idea what the cash balance is for



Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on April 12, 2014, 06:37:33 AM
Quote
(g) Fixed assets
(i) Investment property
Investment properties are land and/or buildings which are owned or held under a leasehold
interest (note 1(i)) to earn rental income and/or for capital appreciation. These include land held
for a currently undetermined future use and property that is being constructed or developed for
future use as investment property.
Investment properties are stated at fair value, unless they are still in the course of construction
or development at the end of the reporting period and their fair value cannot be reliably
determined at that time.
Any gain or loss arising from a change in fair value or from the
retirement or disposal of an investment property is recognised in profit or loss. Rental income
from investment properties is accounted for as described in note 1(s)(ii).
When the Group holds a property interest under an operating lease to earn rental income
and/or for capital appreciation, the interest is classified and accounted for as an investment
property on a property-by-property basis. Any such property interest which has been classified
as an investment property is accounted for as if it were held under a finance lease (note
1(i)), and the same accounting policies are applied to that interest as are applied to other
investment properties leased under finance leases. Lease payments are accounted for as
described in note 1(i).
(ii) Hotel property
Hotel properties are stated at cost less accumulated depreciation (note 1(h)) and impairment
losses (note 1(j)).
So it looks like the VIC article is right about their hotels being worth more.

And the real estate could also be worth more, if they  are still technically under construction?

Quote
Profit from sale of properties in Macau rose to HK$96.4 million during the year as
compared to HK$14.3 million in 2011
so revenue there was 129 million i think. and 96 million in profit. This means a 4x mark up right?

So coming back to accounting rules
Quote
Property development 335,931 – 335,931
that is at cost. And not fair value.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on April 12, 2014, 06:38:24 AM
They may be able to be sold a premium to book but the VIC report has the properties held for sale at HK$1.939 b versus a BV of HK$283.5 m.  These properties are appraised annually see footnote 29 (a) (i) and 12 (a) (i).  Is this amount of mark up believable?  If the financial statements are this far off using the fair value standard then I think the auditors would have a big problem with Keck's financial statements. 

For the hotels there may be some mark-up but if you look at there assumption for the Vietnam hotels @ 10x earning/FCF that is not cheap considering it is in Vietnam.  This marks up cost by about 150%.  If we look at NOI then BV is cap rate of 38% and the VIC report is 15%.  If we use the mid point we write-up $450m.  The other big hotel mark-up is SF about 100%.  I could not find the implied $109m of NOI but was only able to find about $58m.  So the BV is pretty close to the NOI/cap rate (7.8%).  So if you mark to BV the investment properties and Vietnam hotels to the mid point between VIC and BV is 40% of BV similar to Wheelock.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on April 12, 2014, 08:29:08 AM
If you search fro macau, in the  beginning:

Quote
Macau
As a result of strong economic activity arising from increased visitors arrivals to Macau, robust gaming receipts, as
well as continuing development and construction of hotels and infrastructural projects, the property sector has been
a significant beneficiary. The sector witnessed enhanced capital values as well as strong increases in rental rates
for properties across the board. Profit from sale of properties in Macau rose to HK$96.4 million during the year as
compared to HK$14.3 million in 2011, whilst profit from leasing activities increased to HK$85.7 million as compared
to HK$59.1 million in 2011.

And note 17':

Quote
At 1 January 303,384 306,190 10,727 10,727
Properties sold during the year (note 5(c)) (19,857)

So 19 million was written off, and a 96 million HK$ profit was noted. So that is a mark up of 5.5x right?

If you look at the revaluation of their regular property then it was rerated by 78 million hkd

The sale of property in japan:
Quote
In September 2012, the Group disposed its interest in the investment properties in Japan to an
independent third party with an aggregate consideration of JPY4,900,000,000 (equivalent to approximately
HK$488,530,000) and realised a gain on disposal of HK$9,870,000

So if you add up the stated profit of development profit of 96 million something doesn't add up. shouldn't this be 96+ 10m = 106 million, instead of 78 million?

I dont think that property held for sale is held at fair value, but at cost. That is the only way this makes sense here.

Seems that properties held for sale is treated as inventory, so the profit of that doesn't show up in fair value adjustment. And inventory is held at cost normally
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on April 12, 2014, 08:50:36 AM
They did obtain good pricing for those units about 7% of the total held for sale but I think it is a big assumption they would be able to obtain that pricing across the rest of the development sales.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on April 14, 2014, 05:38:08 AM
they sold them for 6.5-8.5k$ usd per square metre untill now. His valuation of 2.7 billion assumes slightly under 10k$ per square meter. Given that they have 38k square meters to sell, that is 380m us = 2.9bn HK$. Since their last sales in 2012 real estate prices have risen more then 50%. various websites say average real estate price for living space is now 10k$/sqm. Since they sold the last apartment.

And it is still half of that in hong kong with 20k$/sqm and singapore with 17k sqm$. Japan at 11k$/sqm. And Macau has limited space with more and more business flowing in every year. So not weird that prices of real estate are high. also their blocks seem to be in a good location.

Also the newly built light rail transit will stop right before one of their apartment blocks when it is finished this year.

What is really convincing in this argument, is that soon Macau will open up to more chinese people when the bridge is finished. I read a blog post on some casino stock in macau a while back. And his research looked pretty convincing with some interesting links. He deleted his blog tho. Ill try to dig up some stuff on that.

The fact that real estate shot up 50% in almost 1.5 years should tell you something as well about anticipation of increased revenues from main land china. I dont think that is because of a bubble forming.

And his other argument on that fully serviced apartment blocks should fetch a premium also sounds reasonable. When apartment hunting I looked at those places and they generally seemed to want higher rents. Especially if they are not much around. 21k of the 38k sqm is serviced.

So if they only get 6k$/sqm, that is still 1.7 billion x 0.7 = 1.2 billion HK$ for keck seng. And that really seems like lowballing it. a 40% discount to current average prices! For better then average real estate.

Only problem i might have with the sqm, is that often they count hallways and elevators as well. So the real number could be smaller. Especially if there are several apartments in a hallway. I doubt they did this in their annual report tho.
Title: Re: 0184.HK - Keck Seng Investments
Post by: thefatbaboon on April 14, 2014, 06:06:26 AM
yada,

you're looking in the right place - macau is the key uncertain value. 

keep in mind though that the sale you referred to was of a couple of filet-mignon apartments, and the sale was to the brothers who control KS ;)

i'm not implying that the values were inflated (or deflated)  - and you're right that values in Macau have risen significantly since then.


Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on April 27, 2014, 02:18:08 PM
http://www.samachar.com/Macau-gambling-boom-spawns-a-housing-crisis-oehhLbajdfe.html

http://www.businessweek.com/articles/2013-05-22/betting-on-a-new-gambling-boom-in-macau

@thefat: they were sold pretty much at average market values I think. Just have to wonder who will buy those appartments. But I guess as long as prices keep shooting up, it means there is loads of demand.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on August 14, 2014, 09:44:02 AM
Wondering what they would do with that cash pile?  http://www.keckseng.com.hk/Files/Announcement/2014/LTN20140814035.pdf

Does this make the stock more or less attractive or neutral? I'm sure there is a lot more to it than EBIT/PurchasePrice because 5% Operating Profit margins aren't attractive to me. But these guys are obviously skilled real-estate investors.


Also: http://seekingalpha.com/article/2418555-keck-seng-4-star-real-estate-play-offers-5-star-return-with-149-percent-upside-to-nav
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on August 21, 2014, 03:34:26 PM
The transaction does appear expensive .  If I use $16m EBITDA (assuming a 15% EBITDA/EBIT ratio similar to Keck Seng's 2013 ratio) and the purchase price of $273m, the total EV/EBITDA goes up from 2.1 to 5.7x EBITDA.  With these numbers the purchase price implies a EV/EBITDA if about 17x.  Hopefully they will disclosure more to understand the purchase price.

Packer 
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on August 21, 2014, 03:43:44 PM
More then 20x earnings for a hotel is pretty expensive right? Maybe they see a way to squeeze more money out of it? Track record isn't bad, so I hope this is not the institutional imperative at work.

Looking at ratings it seems to be a very highly rated hotel.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on August 22, 2014, 10:00:59 AM
Here is a lament about the purchase price:

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/114379

I can only see one response because I am a guest.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on August 22, 2014, 10:07:39 AM
he is saying different metrics as what I see in the report. They paid 20x net earnings after everything right? The comment is complaining they paid 20x EBITDA.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on August 22, 2014, 10:43:24 AM
I had 13.5x EBIT or a 5% cap rate. Cash would be better imo but it's a nice property that likely won't lose value.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on August 22, 2014, 10:59:58 AM
Comments from Red Corner:

"I'd have preferred it if they'd bought a deeply discounted property elsewhere but at a cap rate of 5% the purchase price is in line with Manhattan hotel valuations.

There is no tax treaty between the US and Hong Kong and they may have decided that, rather than pay the 30% withholding tax on dividends back to the parent, the company as a whole would be better served if the sub used the free cash flow from San Francisco to buy another quality asset in the United States. And one would imagine that they'll use cheap non-recourse debt to do so.

That's better than hoarding cash and, in the long term and for most of their stockholders, better than a special dividend.

That's the appeal of this stock, after all: it is (and it is run as) a long-term compounder with some treats along the way."
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on August 22, 2014, 11:23:36 AM
Ha, nice timing...

Pretty great article:

http://seekingalpha.com/article/2444995-keck-seng-churning-out-profits-and-growing-through-acquisition?source=kizur_seekingalpha
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on August 22, 2014, 11:31:03 AM
yeah i guess that is something we overlooked, the tax of bringing the cash back to shareholders.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on August 23, 2014, 05:11:47 AM
Do you know the source for the $20m EBIT (13.5x EBIT) as the Keck Seng PR has only $13.5m operating profit in 2013? 

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on August 23, 2014, 07:49:10 AM
According to the management accounts of the Hotel Property provided by the Seller, the
net operating income attributable to the Hotel Property was US$11,785,000 (equivalent to
approximately HK$91,333,750) and US$13,499,000 (equivalent to approximately
HK$104,617,250) respectively for the years ended 31 December 2012 and 2013. The said
net operating income is calculated by deducting management fees, property taxes,
insurance and reserve for replacement from the gross operating profit.


So apparantly there is also some growth? Maybe NPAT is 14-15 mill this year? Added with possible 30% tax rate and it does not seem so bad all of a sudden.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on August 23, 2014, 09:00:14 AM
In the US since this is being purchased from an LLC (a non-tax paying entity), no corporate tax is paid and  in real estate property taxes are operating expenses, the actual EBITDA will probably be closer to $15 million versus $20 million.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: yadayada on August 23, 2014, 09:06:24 AM
so what you are saying is that actual FCF will be higher because Keck seng is located in Hong kong because they do not have to pay those taxes?
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on August 23, 2014, 09:14:55 AM
What is I am saying is no matter who owns the property they have to pay property taxes and the entity from which they purchased the property does not pay US income taxes because it is an LLC.  So the reported net income is equal to EBITDA less D&A.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: phil_Buffett on October 25, 2014, 01:27:36 AM
http://www.valuewalk.com/2014/10/vanshap-long-keck-seng-bhr-capital-long-glng/
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on November 15, 2014, 09:20:55 AM
Doesn't say anything new and doesn't give enough credit to the Macau properties, but still a good article on Keck Seng.

http://online.barrons.com/articles/expect-rebound-for-hotel-owner-keck-seng-1415761377
Title: Re: 0184.HK - Keck Seng Investments
Post by: thefatbaboon on November 15, 2014, 02:03:18 PM
Weird for such a microscopic foreign company to get a write up in Barrons.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on April 04, 2015, 01:54:03 PM
I think it is an exciting time to be a shareholder in Keck Seng. I have an 11% position.

Keck bought Sofitel in Nov/14. The price paid was about equal to their former market cap! They purchased Sofitel at about a 5% cap rate. Whether or not that makes you happy has no effect on what it will do to their bottom line. Keck went from 7% levered pre-Sofitel to 47% levered post-Sofitel.  They only paid for the purchase with about 25% cash and the rest was debt. It seems they were able to utilize very cheap debt (appears to be about 2%). They have 1.5b HKD in cash and that interest income about cancels out the interest expense. 

Sofitel is a productive asset that will show up directly on their bottom line. The only had about 2 months of operations in 2014 with Sofitel so the earnings power has not been revealed in full. Adding 110m in NI to a company that was doing 300m recurring income pre acquisition, and that has a policy of paying out 30% of earnings, should have a significant effect on the share price.

And still the Taipa properties held for sale is the dry powder that will be lit in 2017. The sale date will come after the completion of the HK-Macau-Zhuhai bridge that has been pushed back from 2016 to 2017.

It's pretty easy to confirm that the held for sale properties are worth between 5-7x what they are carried for. The properties are listed in detail in the AR. One can google search price sq/ft of that specific region in Macau. It is a very desirable spot that will increase in value when the bridge comes through and the arrivals of the new casinos and hotels that are slated to open this year and next.


Valuation: http://postimg.org/image/5yqu53uj9/


With about recurring FCF of 1.22/share the stock is worth 12.20/share before the coming property sales that will add 5-7.50$/share.  That's 60% appreciation on recurring revenue before the Taipa properties are considered.

They mainly generate cash from Vietnam and US, so it's a lot less correlated to China that it appears at first. 

Pre-Sofitel, I had Keck making about 80 cents in recurring FCF. 30% payout and 3% yield is 8$/share--about the current price. Post-Sofitel I have 1.22$/share. 30% payout and 3% yield is 12$/share.

The company is safe with 4.32/share in cash, greatly undervalued assets, and a 7.70/share price. It is well run. The IRR looks large.
Title: Re: 0184.HK - Keck Seng Investments
Post by: constala on April 05, 2015, 03:08:10 AM
For me Keck is an asset conversion play: as time passes, Free Cash Flow growth and the timely sales of their legacy development Macau units will enable KECK to buy more hotels around the world, grow core Hotel Operating Earnings, hence div pay-out, which is, sadly or not, pretty much the only metrics understood by the limited HK investor base. The good news is that Keck management has proved to time their acquisitions and sales with impeccable market sense.The HK-Macau-Zhuhai bridge delayed delivery in 2016 is a sure catalyst and the latest communication is very clear about the exit plan.

Having said that the Macau property valuation exercise leaves quite a large bid/offer:

(i) the carrying book value of HKD 887m is split between Held For Sales (where you have the most valuable residential properties is my understanding) for 281m and Fixed Assets=investment properties for 606m. The "Held for sales" are not at Fair Market Value; only the fixed assets=commercial units are valued following a cap rate method by John Lang Lasalle (3-5%, 9-16.5$/sqft rent). 

(ii) the company discloses a "Macau assets" value of HKD 1716m in its June 2014 interim. (2013: 1604m, 2012: 1208m).
 
(iii) Feb 15 official Macau statistics board update: the average price of residential units  in Taipa amounted to MOP106,316 per square meter, as revealed in data released by the Statistics and Census Service (DSEC). For Macau, the average price per square meter of existing residential units was MOP85,219 and rose YoY 28.8%. The average price of office units and industrial units was set at MOP121,112 and MOP54,250 respectively per square meter, up 62.5% and 60.9% year-on-year. This is consistent with Savills Macau latest updates: US$1237/sqft for residential.

(iv) the current total Macau rent received by Keck is between 68m and 72m per annum.

Taking all those datapoints into account,and the property details and last unit sales given in the latest financials, to summarize, I would attach a Macau assets floor at HKD 1.7 bln (5/share) and potentially up to HKD 2.7 bln (8/share).

To get to the upper value of 2.7 bln I use HKD 60k/m2 for Ocean Gardens, Rose, Begonia, Sakura and Lily courts, and 80k for the Luxury lot W (Aster and Bamboo Court).

(v) however I fail to reconciliate the "outliar" here: http://www.century21.com.mo/properties_detail.php?id=392
This small 1,100 sqft Ocean Garden condo trades for HKD 38k/m2 ....I would appreciate your comments and colour on this?
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on April 06, 2015, 08:48:26 AM
Yeah I also saw that property trading at low prices. Not sure.
Title: Re: 0184.HK - Keck Seng Investments
Post by: TontineCapital on July 02, 2015, 01:46:23 PM
I think there is some serious value in this stock. I submitted this to SumZero yesterday, it's similar to the VIC write-up, which is what I based it on but the information is updated and there is a bit more depth to it. I think its just a matter of time for this to close the gap to true NAV. Partial catalyst with Macau sales in 2017 and possibility for increasing dividends with full year Sofitel FCF. The only thing that hurts us is the possibility of interest rates increasing in the US impacting cap rate valuations.

Appreciate any comments you have.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Golden Geezer on July 02, 2015, 05:56:00 PM
This is a really good analysis - thanks! I held the stock for a year last year and sold it when the year end results were announced. I want to go back in, but am waiting for mid-year results.

A few thoughts/concerns:

1. The Vietnam hotels generate most of the cash. Following the anti-China results last year, a lot of tourists have avoided Vietnam of late (see http://vietnamtourism.gov.vn/english/index.php/items/8692) so I am not sure how good the figures will be this year.   

2. Macau RE numbers for May 2015 were down 12.6% compared to April 2015 and 21.5% compared to May 2014 (see http://macaubusinessdaily.com/Property/Macau-house-prices-down-126-pct). The owners don't seem to be in a rush to sell their Macau RE, so I wonder whether this will delay sales in Macau for another few years. 

All in all it's a great stock, but am not sure when the stock will re-rate.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Packer16 on July 02, 2015, 08:00:45 PM
Nice analysis.  I have looked at this but its cap rate by my calc of NOI is 7.6% at today's price.  Cheap but not super cheap.  The deltas for my NOI calc include backing out HK$137m of mark-to-market price changes, this is based upon revaluing the properties in each year, removing the taxes (they are real cost here - you are not going to get taxes back from the gov't of Vietnam for example; NOI in the US backs out taxes because the property can be put into a structure that pays no taxes).  With these adjustments the NOI is HK$375 m.  In addition these is based on consolidated NOI.  Keck Seng has MIs of 25% of profits and 16% of BV so if you make 20% adjustment to the consolidated NOI you get HK$300m.   

In reviewing the NAV build-up, my number a pretty close to yours except for the Macau properties and the W hotel in San Francisco.  For the SF hotel I would use a number closer to $500k per key (the VIC write-up used $400k per key) based upon removing the Mandarin Oriental hotel (a luxury hotel) and its price being an outlier.  The biggest delta for me is the Macau properties.  They have a Book value of US$100m but the in the NAV build-up they have a value of almost US$430m.  The question in my mind where are we in the boom/bust cycle of Macau real estate.  If you look at the historical data you provided and we are in a pause on the way up then the values are valid.  However if we go back to 2012 pricing we are closer to US$215m and if we go back to 2010 pricing then we are closer to BV.  In my adjusted approach I go back to the 2012 pricing so US$215m.   Also, in using the NAV approach, to estimate the value of a holding company like this a 20% discount is typically observed for holding companies.  Applying these changes gives me an NAV of $14.24 per share.  IMO opinion the biggest risk to NAV is Macau.  If we are at the top of bubble on the way down then I think there will be declines in the share price as the NAV will be shrinking.

Some other cheaper names (bigger discounts to NAV and higher NOI cap rates) you may want to look at are Shun Ho Resources, Asia Standard, Lai Sun Garment, Century City, Great Eagle and CSI.

Packer
Title: Re: 0184.HK - Keck Seng Investments
Post by: bizaro86 on July 02, 2015, 10:17:06 PM
No position, but I'd say that if you're going to remove the Mandarin Oriental as being luxury (which is reasonable) then you should scale the W up for the fact that it's a nicer hotel/brand than either of the Best Western or the Westin Market (which just de-branded off the Westin name to go independent). It wouldn't surprise me if the new owner's wouldn't invest $$ required on changeover to keep the brand, as the property is staying as an SPG hotel.
Title: Re: 0184.HK - Keck Seng Investments
Post by: thefatbaboon on July 02, 2015, 11:12:56 PM
Nice write up.  Quite impressed with how this family operate.  Backtracking and getting out of Japan quickly just before the devaluation started .Picking up W SF during the crisis.  And I know they paid up for Sofitel but I'm glad they put some of the balance sheet to work - and the asset, while fully priced, is prime. As Packer points out Macau is the swing factor here and at the moment one has to assume the skew is negative but waiting a few extra years with these guys doesn't frighten me.

For those who like these kinds of things I've owned Nanyang (0212) for many years.  A NAV discount play - a smaller Keck or Shun Ho - but one of the only ones with a tradition of share repurchase nearly every year for the past decade, with shares outstanding declining from 45m to 35m. 
Title: Re: 0184.HK - Keck Seng Investments
Post by: TontineCapital on July 03, 2015, 06:50:42 AM
Thanks for the feedback. Even if my valuation is high, there is plenty of room to to earn a good return. Their other investment vehicle Keck Seng Berhad also bought a NY hotel. If these guys are moving money offshore we could have a US hotel REIT before you know it. That would certainly bridge the valuation gap.

Packer - I will take a look at that NOI number and those other discounted NAV plays you suggested. Thanks!
Title: Re: 0184.HK - Keck Seng Investments
Post by: thepupil on July 03, 2015, 07:35:56 AM
Not sure if you care (and I doubt they would care, or maybe you work for them) but the name tontine capital is kind of already taken by Jeff Gendell.
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on August 28, 2015, 12:48:03 PM
H2 2015
Macau leasing looks surprisingly good considering the challenging operating environment for many companies there lately.
Canada, Japan look good.
China losses cut in 1/2 and not that material.
Vietnam had 23% margins which is comparable to 2013 and 2014 full years. H1 2014 they rang in 31% margins.

They continue to wait for the HK-Zhuhai-Macau bridge now slated for 2017 to sell their grossly undervalued Macau properties.

Some questions:
1.Based on room rates and occupancy levels, the US operations look good. But the revenue has doubled since PYP due to Sofitel however the income has not budged. The occupancy rate for Sofitel was 85%, so I would think it would be positively contributing.
2. How are margins so high in Vietnam? Are slot machines jacking up the margins to the 20-25% range in combination with hotel operations?

Valuation
If US only contributes 50m profit a year, I'm getting approximately 13.80HKD/share in Aug 2017 when the Macau properties are sold. If one or two properties are sold at 6x BV then maybe the market rerates them before the rest are sold.

If the US contributes closer to 100m profit a year which I had originally estimated, then  the shares may be worth closer to 15$/share.

Both valuations assume the Chinese hotel operations break even, Vietnam does about 156m. I have the property lease at 90m but it may not be that accurate. I've backed out about 32% NCI in the above.

Title: Re: 0184.HK - Keck Seng Investments
Post by: carlo on August 31, 2015, 09:57:26 PM
Quote
(v) however I fail to reconciliate the "outliar" here: http://www.century21.com.mo/properties_detail.php?id=392
This small 1,100 sqft Ocean Garden condo trades for HKD 38k/m2 ....I would appreciate your comments and colour on this?
Real estate listings in Macau (and certainly in China) are not always very reliable. Ie. agents would use them to lure potential buyers. FWIW, other datapoints I found suggested much higher prices.

Quote
But the revenue has doubled since PYP due to Sofitel however the income has not budged. The occupancy rate for Sofitel was 85%, so I would think it would be positively contributing.
There's a remarkable increase in wage expense, from 147m to 262m. During the period, they've added approximately 340 new staff, presumably from Sofitel. An increase in the average salary per headcount is therefore to be expected. I wonder though if there might have been severances, bonuses, etc somehow related to the acquisition. That might partly explain the missing HK$ ~30m in contribution from Sofitel. Just a working hypothesis.

The other thing that might not be obvious to someone casually browsing this thread is that Macau/China, by the most conservative NAV estimates above, accounts for ~$4 out of ~$14 in per-share terms. It's unusually well-diversified compared to many other cheap holding co's trading in HK.
Title: Re: 0184.HK - Keck Seng Investments
Post by: KJP on July 30, 2016, 09:35:27 AM
Here's a recent, asset-by-asset look at Keck Seng:  https://www.scribd.com/doc/310386678/Keck-Seng-Investments-Heller-House-Investment-Memo-4-7-16

Short version:  There appears to be a huge disconnect between the market values of and cash flows produced by the company's assets, on the one hand, and the current market price of its shares, on the other hand. 
Title: Re: 0184.HK - Keck Seng Investments
Post by: ccplz on July 31, 2016, 03:56:56 AM
Seems like this stock is perpetually undervalued..?
Title: Re: 0184.HK - Keck Seng Investments
Post by: KJP on March 09, 2018, 07:52:23 AM
http://www.hkexnews.hk/listedco/listconews/sehk/2018/0309/LTN20180309956.pdf

Also, the HK-Zhuhai-Macau bridge will actually open this year, supposedly!
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on April 24, 2020, 01:47:09 PM
Wonder how Keck Seng will do through his crisis. Youtube presentation from late 2019 of this fund's interest (English slideshow, Spanish narration).

https://www.youtube.com/watch?v=OcPa68O1wbI (https://www.youtube.com/watch?v=OcPa68O1wbI)
Title: Re: 0184.HK - Keck Seng Investments
Post by: manuelbean on April 27, 2020, 07:50:25 AM
I've talked to Alejandro (the guy in the video) several times. He's a great guy. There are several young Spanish money managers that own Keck Seng.
I just don't understand why they bought the rest of the Canadian hotel a month ago for such a "high" price when they could've waited and buy it for less.
These guys have proven to be good capital allocators (probably not on the last Japan deal... still can't figure what happened there) so I would expect them to enter into some M&A deals.
Title: Re: 0184.HK - Keck Seng Investments
Post by: misterkrusty on April 27, 2020, 04:03:05 PM
The major catalyst here is the sale of the Macau apartments, which has felt like waiting for Godot.  The first mention of selling these came in the 2013 annual (filed april '13):

"Further, with the estimated completion of the Hong Kong-Zhuhai-Macau Bridge in 2016/2017, significant improvement in access to Macau from China via high-speed trains, and general improvement in infrastructure in Macau itself with the construction of the light rail trains, property values in general are expected to hold steady and increase in line with economic growth. ... Against this background, and with an objective to enhance shareholders’ value, the Group has decided to continue its policy of adopting a flexible approach towards pricing and marketing of its properties held for sale in Macau."


The HKZM Bridge finally opened around year-end 2018.  But in Sept'19 the 2019 Interim Report (filed Sept'19) they said they were deferring any sales "to a later time in order to capture the benefits to be accrued with the opening of the HKZM Bridge and the anticipated opening of the Macau light-rail transit system later this year."

Phase 1 of the light-rail opened in Dec'19.  But in the 2019 annual they said they were deferring any sales "to a later time in order to capture the benefits to be accrued with the opening of the Hong Kong-Zhuhai-Macau Bridge and the newly opened Macau light-rail transit system in December 2019"

I imagine we'll need to wait for COVID19 to pass, and that's fine.  But afterwards, are they really going to begin sales, or will we later learn they're waiting for more light-rail to be built (or some other delay)?  So far, only the blue line from Taipa Ferry Terminal to Ocean is in operation.  The connection from Ocean to Barra on the Macau Peninsula is slated to be finished in 2022/23.  The light green and yellow lines connecting Seac Pai Van to Lotus Bridge on the mainland has begun construction and that's all we know so far. 

https://www.travelchinaguide.com/images/map/macau/light-rail.jpg

Has anyone been in contact with mgmt recently?
Title: Re: 0184.HK - Keck Seng Investments
Post by: Laxputs on April 28, 2020, 10:34:50 AM
Great posts, guys. With Phase 1 of the light-rail opening in Dec'19, it coincides with virus awareness in that part of the world. Could be they knew sales were not going to do well. We could be looking at several years now until those sales start and with troubled revenues from lower hotel customers along the way.
Title: Re: 0184.HK - Keck Seng Investments
Post by: manuelbean on April 28, 2020, 12:59:31 PM
The major catalyst here is the sale of the Macau apartments, which has felt like waiting for Godot.  The first mention of selling these came in the 2013 annual (filed april '13):

"Further, with the estimated completion of the Hong Kong-Zhuhai-Macau Bridge in 2016/2017, significant improvement in access to Macau from China via high-speed trains, and general improvement in infrastructure in Macau itself with the construction of the light rail trains, property values in general are expected to hold steady and increase in line with economic growth. ... Against this background, and with an objective to enhance shareholders’ value, the Group has decided to continue its policy of adopting a flexible approach towards pricing and marketing of its properties held for sale in Macau."


The HKZM Bridge finally opened around year-end 2018.  But in Sept'19 the 2019 Interim Report (filed Sept'19) they said they were deferring any sales "to a later time in order to capture the benefits to be accrued with the opening of the HKZM Bridge and the anticipated opening of the Macau light-rail transit system later this year."

Phase 1 of the light-rail opened in Dec'19.  But in the 2019 annual they said they were deferring any sales "to a later time in order to capture the benefits to be accrued with the opening of the Hong Kong-Zhuhai-Macau Bridge and the newly opened Macau light-rail transit system in December 2019"

I imagine we'll need to wait for COVID19 to pass, and that's fine.  But afterwards, are they really going to begin sales, or will we later learn they're waiting for more light-rail to be built (or some other delay)?  So far, only the blue line from Taipa Ferry Terminal to Ocean is in operation.  The connection from Ocean to Barra on the Macau Peninsula is slated to be finished in 2022/23.  The light green and yellow lines connecting Seac Pai Van to Lotus Bridge on the mainland has begun construction and that's all we know so far. 

https://www.travelchinaguide.com/images/map/macau/light-rail.jpg

Has anyone been in contact with mgmt recently?

I'm not sure anyone has ever talked to the management. Marcelo Lima from Heller House told me he sold his stake (he was one of the first to get in) because he got tired of waiting for a reply from the management.