A pot of gold down under

Stamford Land Corporation (formerly known as Hai Sun Hup Group Ltd), led by Mr Ow Chio Kiat, received an unsolicited offer of AUD 850 million (SGD 1.05 billion) for its hotel portfolio.
Not surprisingly, the current market cap of Stamford Land, prior to the announcement, was way below the offer price (Market cap of S$388.7million). (Byebye EMH?) The hotel portfolio is valued at a total net book value of just AUD 382 million.

SLC received AUD1.3 million for the purposes of conducting due diligence under the exclusivity agreement (which has since lapsed on 7 March 2008). Since then, SL has received approaches from other parties for the hotel portfolio.

Stamford Land said its property development arm is a growing core business. If its hotels are eventually sold, it said it would focus on increasing its investment in property development and return surplus funds to shareholders.

In its statement, the group said the high and continually rising cost of hotel development in Australia and New Zealand means it will not face much competition as there is unlikely to be an oversupply of room stock in the foreseeable future.

Stamford Land said its second core business - property development - has evolved from its initial foray into the hotel industry. The development and sale of luxury apartments has prospered and expansion is on the cards, it said.

Its property development portfolio, also based in Australia and New Zealand, includes The Stamford Marque, an 83-unit luxury residential development in Sydney.

MYOB thinks that....

Given the current unfavourable situation in the credit market, it takes a strong buyer to fork out such a significant sum. The buyer was said to be a substantial public group with a diversified international portfolio of investment and residential properties and hotel.

Some background on Mr Ow. He's a man who enjoys (and thoroughly deserves) the high life. Back when Stamford ventured into hotel development, Mr Ow did the unthinkable – he chose to operate the hotels under their own name. Stamford Land now owns a collection of landmark luxury hotel properties strategically located in key cities in Australia and New Zealand.
Stamford Land launched its foray into the hotel sector by buying up existing hotel properties. For property transactions, valuations are based on three methodologies: replacement cost; willing-buyer, willing-seller based on the most recent transactions; and yields from earnings streams.

'I feel very passionate about the hotel business because I built it up myself since 1994,’ --- Mr Ow

MYOB assesses that it is a matter of time (and price) before SL sells the portfolio. Back in 2002, Mr Ow emphasized the importance of the expected yield. He strongly claimed that he would not buy properties without yield. Fast forward to 2008, based on the bid of S$1.05 billion, the entire hotel portfolio is offering a low yield of (about) 2.1%. Unless there is something spectacular about the hotel's performance in the coming years, MYOB thinks that at S$1.25billion/yield of 1.75%, SL and Mr OW should seriously consider parting with the pot of gold.

No doubt the hotel portfolio is the core business of SL, the property development arm has the potential to replace the hotel business. Mr Ow has also confirmed the intention to return funds to shareholders which are surplus to requirements. Followers of OCK should know that he is known to be fair to shareholders. Cougar Logs returned much cash from the sale of one of its unit.

If only the market cap of SL is much larger, I would believe that Mr Whitman favours such a unique company which is safe and cheap. With the Aussie economy well supported by the commodity bull, there is less risk of the market falling off the cliff, as compared to the US economy.

MYOB will continue to analyse the numbers to give you a better idea.

Straits Trading AAR: The Coast is clear!!

As a round up to the STCL saga, MYOB would like to report that Ms Chew Gek Khim has been appointed as the Non-Executive and Non-Independent Director of the Board of The Straits Trading Company Limited on 20 Mar 2008.

A little background on Ms Chew:

"Ms Chew, age 46, is the Executive Chairman and Chief Executive Officer of the Tecity Group of private investment companies, the controlling shareholders of the Company. A lawyer by training, Ms Chew graduated from the National University of Singapore and practiced law with the local law firm of Drew & Napier, before she joined the Tecity Group in 1987. She is also director of CapitaRetail China Trust Management Limited, a listed trust of the CapitaLand Group with retail malls in China, as well as FJ Benjamin Holdings Ltd, a fashion retailer in Singapore. Ms Chew is also the Deputy Chairman of the Tan Chin Tuan Foundation in Singapore and the Tan Sri Tan Foundation in Malaysia. She is active in community and public service, and serves on the boards of organizations such as Singapore Totalisator Board and National Heritage Board. She is also a member of the Advisory Board of the Faculty of Law at the National University of Singapore and Deputy Chairman of the National Environment Agency Board."

Currently, The Cairns hold 84.31 % of STCL. They are very close to the 90% mark but I hope they retain the listed status of STCL.

It has been a good ride with STCL. MYOB greatly admire the astuteness of Ms Chew. We wish her all the best in bringing out the hidden value in STCL. It would be interesting to see how things turn out over at Robinson.

Words of Wisdom

MYOB brings you a controversial figure in this WOW entry - George Soros.



"The worse a situation becomes the less it takes to turn it around, the bigger the upside. "



The Federal Reserve cut interest rate by 75 basis points to 2.25% to send the market into euphoria. Dow rallied more than 3.5%, led by Financials. JPMorgan's rescue of Bear Stearns also ensured that no financial institution gets insolvent. Any instance of that would be the final nail in the Wall Street coffin.



MYOB would like to quote Mr Soros on bottom fishing. There is no certainty, or any clarity for that matter, that a turn-around is near. The market, driven by bad economic conditions, could sink further. Nevertheless, MYOB would like to highlight that even with all the gloom in the market, we should make it a point to balance the gloom and the optimism. You want to be there when the train leaves the station.

Emptor caveat.

Words of Wisdom

"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the courage to sometimes say: I don’t know...."

Nassim Nicholas Taleb, post trader


Taleb wrote the best non-fiction seller on Amazon in 2007. "The Black Swan" was preceded by Fooled by Randomness: The Hidden Role of Chance in the Markets and Life. Basically, Taleb explains a lot of 'successes' that we envy to randomness. In one of the most counter-intuitive example, he would rather invest his money with a fund manager who has outperformed from the population of 3 managers than one who has outperformed in the total population of 300.

Taleb also argues that the world has under-estimated fat-tails. His real idea is that the more remote the event, the less we know about its probability.


Down in Wall Street, it is perhaps impossible to find a person who can see how the turmoil would unfold. Quants, MBAs, CFOs are all lost. If they are not, we would not be here in this state in the first place. Taleb shows incredible humility and appreciation of risk and uncertainty, far more than the highly paided CEOs running Corporate America.

If you have time, do check out the two books.