Friday, June 6, 2014

Recent Action - Stamford Land

This is a counter which I have been following for some time now and this month I have made a small addition to my portfolio.
 
 

Stamford Land is the largest independent owner-operator of luxury hotels in Australia-NZ with 7 luxury hotels in AU and 1 in NZ. It is also a property developer with some iconic developments that include the Stamford Residences and The Reynell Terraces situation in Sydney.

If you have been following this counter for some time, you would probably have known that Stamford values its hotel assets on a historical costs basis (less depreciation). Comparing this to the latest transaction that FCL makes to purchase Sofitel Sydney Wentworth for A$202.7m (Dividing by 368 rooms, this came out to be around A$550k/room). On paper, this looks like a counter that is sitting deep underneath at cheap valuation (Stamford cost at book value is around A$50m and each room came out to be around A$218k/room). However, it remains a question when will Stamford unlocks its true value.

For the latest FY14 results, the hotel segment reported an overall increase in AUD terms only to decline due to unfavorable AUD exchange rate. Moving forward into FY15 however, the management are optimistic about the prospect of the hotel segment and growing tourism industry in AU - guess this bodes well for my AHT as well :)

In the property development segment, they have registered good turnover growth of $48m, which more than doubled previous year turnover from the sale of its Auckland project (Stamford Residences Auckland) and Sydney (Stamford Residences Reynell Terraces). The group has also recently sold its upcomiong project Macquarie Park Village, for which revenue recognition will be recognized gradually upon completion in 2017. They have also obtained development approvals for the redevelopment of its Stamford Circular Quay hotel and Dulwich Hill property and we can expect higher sales to come for these projects.

I have seen investors who bought into this counter and are still awaiting for the management to unlock its true value. I think with AU economy picking up, this counter could rise further in the next few years. In the meantime, the 3 cents dividend it recently proposed does not sound too bad while we wait for the true value to be unlocked.

9 comments:

  1. Thanks for sharing about this counter. Everything is so expensive now. Hard to find good deals.

    Renewed investor

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    Replies
    1. Hi Renewed Investor

      It is not easy to find a good deal indeed these days. And you can perhaps see many retailers waiting on the sidelines for a pullback. This doesnt seem to be happening though, what do you think?

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  2. are you so sure that they can pay that 3 cents and how long they can do that?

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    Replies
    1. Hi Kyith

      EPS for the full year came in at 3.14 cents while full year dividends is at 3 cents. At least they did not give out more than what they earned.

      The hotel segment made up about 77% of the overall business segment, and I would consider this portion of the revenue to be more predictable and recurring than the property development segment which tends to be volatile.

      So I think they can maintain their 3 cents dividends at current rate unless something very bad happens to their hotel segment business. That's my thought but i could be wrong.

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    2. This comment has been removed by the author.

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  3. Hi B,

    Yeah, I am waiting for a good entry point to buy a number of stocks. They are just too expensive at the moment. I guess we have to be patient. I do find Stamford Land a little too expensive at current price of $0.64. My entry point is $0.55 - $0.58. This is more in line with their NAV of $0.56.

    By the way, have you considered hock lian seng also? This counter has been blogged by AK71. The company gives out regular dividend about 6%+ at current price of $0.265.

    Renewed investor

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  4. Thank you for the information

    ReplyDelete

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