TSH Corporation just released news that it is diversifying into property development in Australia, it is not advisable to do so when Australia property market is peaking. However, if you noticed its share price was rising for no reason during the past few days before the news was announced, yet SGX has done nothing to query the company for this rise.
Disclaimer: i am vested in this stock so will be biased.
Addvalue Technologies, a global developer and manufacturer of mobile satellite terminals is selling a subsidiary, Addvalue Communications for $330 million in cash to a chinese company.
Although the valuation seem to be rich, but for chinese company interested in high technology in satellite communication, price is not their concern. Thus, the question remains whether the deal will go through, particularly whether the supervisory authority of the chinese company will say “aye”.
There is a commission of 15 million to be paid to a broker who is also a shareholder of the company. According to the company announcement, Net asset value will be about 20 usd cents if the deal goes through.Shares are trading at a discount to this value.
Teho International is diversifying into property development. Although it has an experienced partner but it is late into the game as FED signals interest rate will start to rise next year, this will crimp gains in property development as finance costs rise.
There is a trend of many companies diversifying into property as their core business aren’t doing well or so-so. This is usually a sign of property bubble reaching a peak. It is better to stick to their core business and wait for the tailwind than to venture into property business which is becoming overcrowded.
Seth Klarman just wrote his letter lambasting the FED as usual. Here’s an extract from zerohedge.
“if you’re more focused on downside than upside, if you’re more interested in return of capital than return on capital, if you have any sense of market history, then there’s more than enough to be concerned about. A policy of near-zero short-term interest rates continues to distort reality with unknown but worrisome long-term consequences. Even as the Fed begins to taper, the announced plan is so mild and contingent – one pundit called it “taper-lite” – that we can draw no legitimate conclusions about the Fed’s ability to end QE without severe consequences. Fiscal stimulus, in the form of sizable deficits, has propped up the consumer, thereby inflating corporate revenues and earnings. But what is the right multiple to pay on juiced corporate earnings? Pretty clearly, lower than otherwise. Yet Robert Schiller’s cyclically adjusted P/E valuation is over 25, a level exceeded only three times before – prior to the 1929, 2000 and 2007 market crashes. Indeed, on almost any metric, the U.S. equity market is historically quite expensive.
A skeptic would have to be blind not to see bubbles inflating in junk bond issuance, credit quality, and yields, not to mention the nosebleed stock market valuations of fashionable companies like Netflix and Tesla. The overall picture is one of growing risk and inadequate potential return almost everywhere one looks.
There is a growing gap between the financial markets and the real economy.”
“Someday, financial markets will again decline. Someday, rising stock and bond markets will no longer be government policy – maybe not today or tomorrow, but someday. Someday, QE will end and money won’t be free. Someday, corporate failure will be permitted. Someday, the economy will turn down again, and someday, somewhere, somehow, investors will lose money and once again come to favor capital preservation over speculation. Someday, interest rates will be higher, bond prices lower, and the prospective return from owning fixed-income instruments will again be roughly commensurate with the risk.
Someday, professional investors will come to work and fear will have come to the markets and that fear will spread like wildfire. The news flow will be bad, and the markets will be tumbling.
Six years ago, many investors were way out over their skis. Giant financial institutions were brought to their knees…
The survivors pledged to themselves that they would forever be more careful, less greedy, less short-term oriented.
But here we are again, mired in a euphoric environment in which some securities have risen in price beyond all reason, where leverage is returning to rainy markets and asset classes, and where caution seems radical and risk-taking the prudent course. Not surprisingly, lessons learned in 2008 were only learned temporarily. These are the inevitable cycles of greed and fear, of peaks and troughs.
Can we say when it will end? No. Can we say that it will end? Yes. And when it ends and the trend reverses, here is what we can say for sure. Few will be ready. Few will be prepared.”
ABR holdings sold its lucrative chocolate retail business back to the founders and has a big sum of cash for investment, but instead of using it to expand its core food business, it intends to diversify into property business.
Is this a sign of diworsefication? Does the management has expertise in property business and considering that property business will be tougher as interest rates rise, is it a wise choice?
Extracted from Edge Singapore:”Second Chance entered the business of investing in properties in 1999-2000. It has held its properties as long term investments and earned steady rental income which became an increasing part of the group’s revenue and profits over the years.
The group said it has reaped the benefits manifold over the past 14 years or so in the property investment business.
“Going forward, the board thinks that it is prudent to significantly reduce the group’s exposure to its investments in properties. Additionally, the opportunity to sell the properties en masse is a rare one and provides the group with an easier and more expedient means of disposing the properties as compared to selling each property individually,””
Since Second Chance is retreating from the property scene and its CEO is a shrewd property player, it shows that property will no longer be the high-flyer as of yesterday.
Telegraph reports that:”markets face an “new oil supply glut” as three forces combine. US shale will add 1m barrels a day (b/d) to global supply for the third year running; Libya will crank up shipments after a near collapse in 2013; and Iran will come out of hibernation. “This will push OPEC spare capacity to levels last seen in the depths of the financial crisis in 2009..Saudi Arabia may have to slash its output by a quarter to 7.5m b/d this year to stop the bottom falling out of the market. The Saudis no longer have such money to spare. They are propping up an elephantine welfare nexus to keep a lid on explosive tensions in the Eastern Province, home to Saudi oil and its aggrieved Shia minority. A cut of this size would push the budget into deep deficit….a simultaneous return of Iran and Libya could add up to 3m b/d. Just a third of this “positive supply shock” could shave $20 off the world oil price, unless OPEC’s fractious cartel can slash output quickly enough to offset it. “
Falling oil price will be good for the economy in the long run as energy cost are reduced and consumers will have more spare money although the price of oil is not likely to repeat the lows of 2008.