Tuan Sing Holdings Limited - Can it ramp up cash generation to make share price rise?

21/1/2013 – The seventh round of property price cooling measures in Singapore, and the worst economic growth record in 13 years for China, have taken their toll on Tuan Sing Holdings (TSH).

While the latest numbers show China's economy grew 7.9% in Q4 versus 7.8% estimated, it was still not what the Chinese have been used to.

What do these factors mean for TSH?

It is primarily a property developer with this segment contributing more than half of M9 FY12’s profit before tax.

The group has completed various property development projects, such Leedon Park and Adam Park Condominium in Singapore and Lakeside Ville in China.

But in addition to the property business, it also owns 50% of two hotels in Australia, namely the Grand Hyatt Melbourne and the Hyatt Regency Perth.

TSH has also invested in several entities such as 80.2%-owned SP Corporation Limited, 97.9%-owned Hypak Sdn Berhad, 43.3% interest in SGX-listed Gul Technologies Singapore Ltd and a 49% stake in Pan-West.

UOB Kay Hian Research highlights that share price catalysts include an improvement in quarterly earnings due to the recognition of property sales and revaluation gains in its investments.

It has also undertaken several projects, namely Seletar Park Residence, Mont Timah and Sennett Residence and plans to launch Cluny Park Residence in early 2013.

Most recently, TSH started redeveloping Robinson Towers into a grade A office tower with a retail podium with a total gross floor area of 23,900sqm.

The analyst says TSH should be keeping the project as an investment property and has engaged Jones Lang LaSalle as the leasing agent.

TSH is trading at a price-book ratio of 0.67 times.

Price is what you pay, value is what you get.

So in this case you're paying 67 cents for every dollars worth of value.

But beware: the annual report of FY11 highlights that net gearing jumped to 0.70 times in FY11 versus less than 0.01 times in FY10.

The latest Q3 results indicate that net gearing has fallen to 0.60 times.

The total shareholder return in FY11 was negative 33%, versus 60% in FY10.

So, investors need to consider there's more than just a discount to asset value.

It is paying a yield of only 0.83% - much the same as a fixed deposit, but with much more risk.

The company's business spent $421.6 mln more cash on operations than it earnt last financial year.

In the Governance and Transparency Index it scored 60, which puts it in 25th place in the rankings.

So, TSH is trading below book value and is in of the top 100 for governance and transparency.

But it pays a lower yield than a fixed deposit and spent more cash last year than it earnt.

Sources & further information

Sources

UOB Kay Hian research Report


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