Far East Consortium (HKEX:35) is a Hong Kong based company with a global hotel and residential property development portfolio focused on middle class Asian consumers.
I think there is a cleaner thesis for investment in Hong Kong real estate companies which are extraordinarily cheap. In the case of FEC, it's at a 90% discount to NAV with multiple catalysts that could drive appreciation over the next year:
1. IPO of the Czech hotel/gaming business (Palasino Group) has put a public market value of HK$3.1BN on FEC's retained 72% interest that exceeds FEC's own market capitalization of HK$3.0Bn. All of the international real estate and hotels are effectively valued at zero.
2. FEC achieved substantial deleveraging through delivery of a HK$3.4Bn office sale in Hong Kong (to CLP Properties – the local utility)
3. Projected delivery of HK$10.6Bn of completed residential presales over the next 12months will significantly reduce corporate leverage and interest expense.
4. Chinese international tourism is recovering slower than expected 15 months ago, but nevertheless growing, and should benefit from a strengthening of the economy and consumer sentiment
5. Chairman David Chiu has been buying shares nearly every day, raising his stake in the company to 54.6% at 4/23/24 from 51.6% at 12/31/22. His daughters Wendy and Winnie have also bought shares this year.
Yes, all that information is correct ...but the reality is that there are *willing sellers* ready to match his bid almost everyday single day since July last year!
Between father Deacon Chiu's estate and son David, they now own 2/3 of the shares.
I don't think he plans to take the company private.
So, I guess that all what we can expect is the dividend payout returning to about HK$0.18/year starting w/ the larger interim end-August followed by a smaller final dividend in December:
As for Yuzhou (1628.HK), given the insider deals they did with chairman Lam Lung On's wife Kwok Ying Lan and the debt levels, I might steer clear for now:
It’s debt levels is “scary” in light of interest rate hikes in recent time. Chris Hoong also started selling his shares, for as low as $1.24/share. Hmm
It is clear that debt levels are very manageable and likely falling in 2024 and 2025 as many new property developments are completed and releasing the working capital that was tied up.
John, I recall you wrote about Yuzhou Properties (1628.HK) some years ago.
Might it be time to revisit that sector all these years?
https://www.bloomberg.com/news/articles/2024-04-25/ubs-analyst-who-cut-evergrande-turns-bullish-on-property?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcxNDQ1ODQ3OSwiZXhwIjoxNzE1MDYzMjc5LCJhcnRpY2xlSWQiOiJTQlJLSThUMEcxS1cwMCIsImJjb25uZWN0SWQiOiJVUTU1R1FJSERNMFc0V1BLVUhYSUpRMUROTlFPWU1HUSJ9.n3UhzAx44TlhBpuZBJVwdCaPFO3UKI9o5DF7b1NPIok&sref=iX5RR1t4
I think there is a cleaner thesis for investment in Hong Kong real estate companies which are extraordinarily cheap. In the case of FEC, it's at a 90% discount to NAV with multiple catalysts that could drive appreciation over the next year:
1. IPO of the Czech hotel/gaming business (Palasino Group) has put a public market value of HK$3.1BN on FEC's retained 72% interest that exceeds FEC's own market capitalization of HK$3.0Bn. All of the international real estate and hotels are effectively valued at zero.
2. FEC achieved substantial deleveraging through delivery of a HK$3.4Bn office sale in Hong Kong (to CLP Properties – the local utility)
3. Projected delivery of HK$10.6Bn of completed residential presales over the next 12months will significantly reduce corporate leverage and interest expense.
4. Chinese international tourism is recovering slower than expected 15 months ago, but nevertheless growing, and should benefit from a strengthening of the economy and consumer sentiment
5. Chairman David Chiu has been buying shares nearly every day, raising his stake in the company to 54.6% at 4/23/24 from 51.6% at 12/31/22. His daughters Wendy and Winnie have also bought shares this year.
Yes, all that information is correct ...but the reality is that there are *willing sellers* ready to match his bid almost everyday single day since July last year!
https://simplywall.st/stocks/hk/real-estate-management-and-development/hkg-35/far-east-consortium-international-shares/ownership
Between father Deacon Chiu's estate and son David, they now own 2/3 of the shares.
I don't think he plans to take the company private.
So, I guess that all what we can expect is the dividend payout returning to about HK$0.18/year starting w/ the larger interim end-August followed by a smaller final dividend in December:
https://simplywall.st/stocks/hk/real-estate-management-and-development/hkg-35/far-east-consortium-international-shares/dividend
At the current share price of HK$1.05, that is not a bad proposition given that you need to invest in distressed debt earn that level of yield.
As for Yuzhou (1628.HK), given the insider deals they did with chairman Lam Lung On's wife Kwok Ying Lan and the debt levels, I might steer clear for now:
https://www.mingtiandi.com/real-estate/finance/yuzhou-properties-hong-kong-the-center/
It’s debt levels is “scary” in light of interest rate hikes in recent time. Chris Hoong also started selling his shares, for as low as $1.24/share. Hmm
It seems that article doesn't contain the word debt or liabilities. This company increased debt from 16B to 31B in 5 years.
Far East Consortium's debt levels are discussed in detail in this investor presentation:
https://webcast-miracle-plus.com/event/view/2381?id=6ReiOs#myCarousel
It is clear that debt levels are very manageable and likely falling in 2024 and 2025 as many new property developments are completed and releasing the working capital that was tied up.
Thank you!