Creo Medical Share Discussion Threads

[ashthorpedo] 04/8/2010 16:08

I have no intention selling either. Certainly not at the current price. Its just psychologically hard every time I look at my account and see a large loss at CREO.

[newswseller] 04/8/2010 14:56

I still don't have mine (TDW) but plan to give it 6 more months before deciding to sell or hold, so doesn't really matter to me.

[ashthorpedo] 04/8/2010 14:49

My TCT shares have still not been credited to my trading account. Just got off the phone to T D Waterhouse who told me that it would take several more weeks as the the transfer is so complex. I don't know if this is true or I'm being spun a line.

[longsight] 04/8/2010 07:57

Eddie - to my bull argument I wd add the potential revaluation of the SGD & the RMB in which assets & the share price are denominated against the US$ in which a large % of the loans are denominated & the £ [for enhancing cap gains for UK shareholders]

[flip101] 04/8/2010 07:09

Decent volume again so far today.

[flip101] 03/8/2010 15:58

Eddie, valid points however the Irish now have a sub 50% holding and larger shareholders are not happy with the current situation. This current valuation gap will not be allowed to persist for a significant period of time.

[eddie1980] 03/8/2010 15:01

longsight - why do you think the shares trades at such a discount to NAV, and why do you think that it will be at such a small discount in 2014?

You are predicting a dividend yield of 2.18% (and a payout of circa 90% of EPS) in 2014 - hardly inspiring for a property company.

Based on JP Morgan's report (with a June 2011 target of $2 - again hardly an inspiring increase considering it listed in singapore at $1.80.), the company's EPS is negative until 2013 - in 2013 it generates $0.10 (and so pays a dividend of 100% of EPS) and only $0.13 EPS in 2014.

It is clear that the market values TCT lower than its peers and this is not just the fact it was listed on AIM, or is now only just listed on Singapore exchange.

So I would be interested in knowing why you think the market will reduce the gap to NAV. Is your assumption of $5.5 a share just a guess on a smaller gap to NAV? Why do you think the market will value a share that creates $0.10 in 3 years time at $5.50?

NAV may look impressive but this company generates zero income from it (negative in fact for the next 3 years) - I've not seen many property firms achieving that!

If you owned these assets, you would sell up now as you can't generate a return from them. But the majority shareholder does, so they will not sell!


Per the JP Morgan report, EPS in 2014 will be $0.13. Your assumption is that the NAV will be $6.50 - so the assets are producing a yield of 2% - that is a very poor return. Even in Boom times, London properties had a yield of 4-5%, now its more like 6-7%. Could the assets be overvalued? Could they ever achieve those prices in a sale?

Funds generally invest in propety firms for a yield. Look at the carnage to UK property shares when they stopped paying dividends in the slump. Unless the company is going to sell the assets (v.unlikely here as treasury is major shareholder, and they generate large returns from the buildings through their fees), the shareholders get very little return for their money.

There is no point in saying 'yes, but the assets are worth £xxx' because you have no control over the ability to sell them. And the major shareholders receive a far greater return than you as they collect the mgmt fees. You could hold the share for 100 years and if it only produced yields of 1-2% pa, it would always be valued at a discount to NAV as this is the only return you will get from the share, if zero chance of being sold.

[longsight] 03/8/2010 12:36

Flip - from my projections, fwiw, I anticipate that by 2014 NAV will be above SGD6.50, the share price will be above SGD5.50 [allowing for some discount] & the divi will be 12c representing a yield of 8% on the current share price & cap gains on the share price of 275%+. I won't be surprised if the projections on NAV are exceeded. Over a 10 year period I anticipate tremendous rental & cap growth on the Shanghai portfolio. With retail consumption growing at over 18% yoy & set to accelerate & looking at how lo Shanghai commercial propertyt values are in comparison with HK, London etc - fantastic long term prospects.

The management also look very classy,

A classic buy lo, sell hi scenario, imo.

[flip101] 03/8/2010 12:24

The 2 year picture is key. Central Plaza will be at the point when a sale is desirable and this will underpin the current NAV just as Tangdao Bay did. City Centre will nearly be complete and the company will see significant NAV uplift from this. Equally I've been told Beijing Logistics park could contribute quite nicely in a year or so.

Medium term this is an easy double.

[longsight] 03/8/2010 12:17

Flip - agreed. Some might sell out after looking for instant gains here & being disappointed. But for those who can wait beyond 6 months, I think the share price performance shd be very good. Longer term, I think the income & cap gains here look fantastic.

[flip101] 03/8/2010 12:09

The company will look very different in 1-2 years with the vastly improved loan terms combined with very significant rental uplifts at City Centre.

[flip101] 03/8/2010 12:07

Agree. The aim of the company is not to just deliver a rental income and is principally a capital gains vehicle. You can't complain at the company when they deliver a capital gain (Tangdao Bay) and then decide to distribute this.

I do however suspect that another share buyback could be on the agenda if the price stays at this level.

[longsight] 03/8/2010 11:52

Eddie - that divi is coming out of profits from sale of some of the portfolio. I'm not sure where you get the idea that there will be no profits for 3 years. With the refurbs & new development due for completion by 2012, the drop in loan costs & the increasing rentals from the new leases - 3 years looks too pessimistic to me. You might note as well that the view from TCT's investor relations is that they introduced the divi with a view to sustaining & increasing it.

The view I have is that TCT offers capital growth in NAV, a reduction in the discount to NAV & increasing rentals & dividend stream.

The shares are starting to be more liquid. We have had nothing but positive developments in the last 6 months.

Huge rewards, imo, for the patient. I have sold other shares in order to keep a big holding here long term.

[eddie1980] 03/8/2010 09:42

Yes they are Flip101 but that dividend is not coming out of income earned during the year - they do not have positive earnings for 3 years.

[flip101] 02/8/2010 12:47

One largish trade. Hopefully a sign of institutional interest. Still going to pay you 0.10 SGD to hold per year. ~7%.

[longsight] 02/8/2010 10:07

Flip - agreed. Nice to see a bit of interest picking up. Over £100k worth traded today.

[flip101] 02/8/2010 07:42

Reasonable volume today.

[longsight] 29/7/2010 19:02

Eddie - I don't know if this is all their debt but certainly a big chunk. Also another loan was renegotiated at far lower interest rate just before CREO delisted. Obviously very good for the march to net profit - but surely also a validation from a big bank that TCT's portfolio are good for the money & that there is competition to lend to them at lo rates. A lot of due dilligence on TCT recently with the listing doc, JP Morgan note, & the Bank loans.

I agree the share price might stagger but I am set on holding a big chunk of TCT long term. To me TCT is a buy & not a sell. This is a far better situation than CREO. The fact that the Singapore Stock mkt has so overlooked it tells you this is mega cheap. As they say - buy lo & sell hi.

[eddie1980] 29/7/2010 18:35

Wow, is this suggesting that the cost of debt has just been nearly halved for TCT. As I have previously highlighted, the inability of TCT to produce net cashflow is a major issue for TCT.

In 2009, rents were SNG$77m and interest costs $55m. Net of fees and admin costs, they were loss making (before recognising unrealised forex gains)

Reducing that interest cost by 46% would knock off SG$25.3m on a comparable full year basis, which is pretty impressive. Would certainly have a positive impact on the 2011 full year P&L. (which is good as they will be cranking up the expenditure on the city centre expansion but not benefitting from any increased rents.)

Good news. Still bet the share prices drifts down on the news though!

[longsight] 28/7/2010 19:54

newseller - don't know. If you telephone Sarah Moriarty or email here she shd know.

[newswseller] 28/7/2010 19:52

longsight, do you know if a divi date has been announced?

[longsight] 28/7/2010 17:46

Eddie & Mike very much appreciate your contributions.

Eddie - I don't want to run an education seminar here so I suggest worthwhile reading the listing doc. Fees are not based on NAV but instead on rents by & large.

It is also incorrect to say there is no yield. TCT is paying 5c guaranteed in respect of the first 6 months. Sarah Moriarty has informed me that TCT intends to pay a sustainable divi beyond that.

As to why they are not making a profit at present - check out Edison & JP Morgan. This is a very geared play on the refurbs, new development & new leases. add in the mega drop in interest rates just negotiated & the prospective growth in rents & NAV.

The fact is you are buying a chunk of prime commercial Shanghai at 33% of NAV. Will Shanhai commercial property do well over the next few years? Well retail consumption is growing at 18%+ yoy - retail will be almost half the portfolio in 2012. Shanghai is set for major growth in the PRC financial services / insurance industry. Commercial office space will do very well long term.

On the issue of is NAV accurate - probably an undervalue. Use top notch independent valuers & 2 previous disposals revealed conservative valuations versus sale prices.

I repeat: the fact is you are buying a chunk of prime commercial Shanghai at 33% of NAV.

Imagine being able to buy an office block & retail development in Shanghai at one third price.

I think this will pay a great yield on current share price going forward & at some point the share price will close in on NAV but by then NAV will be far higher.

A question of patience - but I won't be surprised by NAV at SGD10+ in 10 years time. So I can handle a 6 x return & meanwhile getting good income. In the meantime, the shares might continue to stumble short term - though the recent news items are very positive. So management & the portfolio are delivering as best as can be hoped. Nothing has changed since CREO - except for the better. The TCT is a far better vehicle for the business. Far fairer for shareholders. No more rip off fees. A Director bought shares after the relisting. The portfolio was revalued upwards. A number of improved leases were signed. The new loan facilities are much cheaper & ensure funding for the new development by 2012.

Has JP Morgan & TCT failed miserably to market this. Totally agree. Quite pathetic. But probably not helped by not issuing any shares. With the illiquidity, IIs have clearly stayed on the sidelines.

But for all that - this is a buy not a sell.

[eddie1980] 28/7/2010 16:52

Mike - yes NAV's do provide a basis for valuation, but investors also expect a return. It doesn't matter what the NAV, if it is producing a net zero return for the shareholder (i.e no income, and therefore no dividends), you will be making 0% a year on your investment and purely relying on capital growth. But if there is no expectation of sale, then how is an investor going to realise a return on their investment?

Obviously at a certain level, investors step because of the gap with NAV, which offers a floor against the share price.

Commercial property can be valued on the yield it produces. So, are the premises producing too low a yield? - is this suggesting they are overvalued? Or is the yield being produced being taken by fees?

All I know is currently the assets of TCT are producing negative income for the shareholders, and hence why I expect their is a large gap to NAV. If/when they start generating sufficient income off those assets, I expect the market will put a higher valuation on the assets. At the moment, it would seem they are not pricing in the companys claim of future increased rents.

I know they are going to start paying dividends this year, but maybe the market is discounting this if they know the company is merely borrowing more funds to pay this and not a result of the income it is producing.

Longsight - I know u say fees are in line with market/peers. But here lies the problem - fees are based on NAV's, and the amounts of investment expenditure. The assets they are taking the fees on are not producing enough income. The fee are too high if the income they are able to genarate from the assets cannot cover the fees and leave some for shareholders. Maybe we should question why they can't generate a higher yield on their assets. Are they performing poorly?