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Market Sense 市场意识: How much is Chip Eng Seng undervalued by Mr Market?
Be decisive, Be patient, Don’t be greedy, Don't be stubborn

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Tuesday, 29 July 2014

How much is Chip Eng Seng undervalued by Mr Market?


http://www.puntersgallery.com/showthread.php?t=207&highlight=chip
Chip Seng Seng is very undervalued. The Alexandra Central project alone is likely to increase its NAV by at least 60 cents.

Management bought back millions of shares at 0.74 to 0.76 cents. Current Market price is 0.805. Hence, Market Cap works out to be $516mil. 

Did anyone estimate the obscene profit CES will reflect in its book in the coming few quarters?

I did some rough calculation using just one of its projects, Alexandra Central. It seems that just one major project can already create enough NAV to cover its current market cap.

a. 450 hotel rooms x $1mil per key = $450 mil (Valuation)
b. Commercial retail space = 90,000sqf x $5233 (source: property guru)PSF x 80% (efficiency ratio) = $377mil (REVENUE)
c. Total cost of investment = $320mil (land, construction, etc)
(land cost = $189mil. The construction contract was awarded to Keong Hong for $101mil). [$350mil might have been "overstated" at company's website]

Shareholder value from this single project alone ~ $507mil , which is close to its current market cap (yet to be recognized in its books), based on very conservative assumptions!

And this is just one project and there are many others (Nine residence/Junction 9, progressively recognized, etc). Its construction business will earn about EPS 5 cents per annum.

The current NTA of around 80 cents seem to be grossly understated. Given that company was buying furiously at 75.5 cents on average, it could not be just for a meager 10-20% gain (IMHO). In fact, company is sending a very clear and strong signal to its loyal shareholders. 

The total intrinsic value by end of FY2015 would probably in the region of $1.60~$1.80 (very conservative, excluding TM and other pipe projects such as the Malacca retail/hotel, Fulcrum, Doncaster project in Melbourne)


Posted by ckchoy77 at 13:17
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