Ho Bee update

Still busy, but took some time to briefly look at Ho Bee's financial statements for the 3rd quarter.

Revenue down 59%. Profits after taxation down 50.1%. Profits from operations down 47%. Cash flow from operating activities down 99%. Pretty dismal showing here.

Now the markets have already punished Ho Bee relatively badly here. It's currently about 80% down from its peak, trading at around 38.5 cents now. Let's take a look at how the markets have factored in the pricing for Ho Bee. Will not take a look at other parts of the financial statements for now.

Development projects up in FY2009 are The Coast, Paradise Island, Orange Grove Residences, Vertis and Quinterra. The accummulative book values( NOT revalued ) are at $1,259,427,000. Its investment properties stand at $303,432,000,along with its short-term receivables of $15,715,000 and cash in the bank of $94,523,000.

Ho Bee is a relatively highly geared firm, especially compared alongside the other developers, with debt-equity of around 1.45. Total liabilities, short-term and long-term, stand at $1,301,427,000.

The net position is as follows:

(Bk Value of invest prop + devt projs + short-term receivables + cash) -

(short-term and long-term liabilities + payables) =

( $303,432,000 + $1, 259,427,000 + $15,715,000 + $94,523,000 ) -

($1,301,427,000) =

$371,670,000.

The current no. of shares that Ho Bee has as issued share capital is 737,338,000, no Treasury Shares. Therefore, the current net of surpluses is:

$371,670,000 / 737,338,000 = $0.5041 / share.

The markets are now exchanging Ho Bee's shares at $0.385. The implied valuation net of surpluses is thus 737,338,000 * $0.385 = $283,875,130.

The markets are factoring in a write down of approximately ($0.5041-$0.385)/$0.5041 = 23.6% write-down in Ho Bee's assets.

Now, let's take a look at Ho Bee's current 8 residential projects. Out of these 8, 3 are yet to be sold out. Paradise Island's % sold-to-date is 96%, Turquoise 48% and Orange Grove Residences 92%, with the majority, save for Coral Island, yet to be recognised in the quarter.

Now, let's take a quick look at the quality of the portfolio. Out of the 8, 4 are Sentosa Cove, one Mount Sinai, Amber Gardens, Holland Road and Orange Grove Road. All high-end.

Now, with the current prices factoring in about 1/4 of Ho Bee's assets to be written off, it's unclear whether the stock is trading attractively or not. Downside COULD be limited to around 50%, i.e. $0.25/share. But the quality of the portfolio could limit this downside. Attractive? Anybody's guess.

Anyhow, but still, there's a likelihood that the markets will punish Ho Bee tomorrow for this dismal showing. But then again, which company hasn't been hit badly in terms of profits?