Wednesday, November 26, 2014

Recent Action - Stamford Land (2)

I accumulate a little more of Stamford Land today after the stock price consolidate at around $0.55.

With this purchase, I now own 10 lots of Stamford having accumulated some in the past. I've also written a post in the past when I purchased them at a slightly higher price. See Here

The fundamentals have not changed for the reasons from the day I decide to purchase this counter.
 
I am looking at this counter from an asset play point of view where their hotel assets remain recorded based on their historical costs under the PPE segment of the balance sheet. Based on the FCL example I have given in my previous post on Stamford, the RNAV value for the hotel assets should be more than double the current book value stated. In other words, I am really just awaiting for one day when someone really bids for the hotel assets from Stamford and the management agree to the sell. I am not sure it will come soon as the management has rejected a bid price back then in 2008 when the bid price was equally attractive. This will become a long term investment for me anyway as I buy the hotel assets cheap at half the price and get the business for free while waiting for value to be unlocked one day.
 
1H14 Earnings came in at 1.34 cents a share, so they would most likely ended up the year with earnings less than 3 cents a share. It will be interesting to see if dividends of 3 cents a share will be maintained, otherwise 2 cents might be more sustainable. At a current price of $0.55, 3 cents would represent a 5.5% yield while 2 cents would represent a 3.6% yield.
 
Revenue from their development Macquarie Park Village will only be recognized in 2017, so earnings will somewhat be dependent on the hotels and probably subdue from now till then. Elsewhere nothing much to shout on as this will probably be a long term investment play for those who are willing to wait.



Coincidentally, I share the same office building as Stamford and took this photo on my way to lunch today :)
 
With this purchase, this adds $180 (assuming 3 cents a share) to my annual dividend income. I will update the details of the purchase under my Recent Transactions shortly.
 
What do you think of this stock? Spot any other good stocks lately?

7 comments:

  1. Extremely cheap buy B! I have been looking into some penny stocks as well and I still have mixed feelings about them but this looks like a quality buy! Hopefully this stock will appreciate over time. I'll look into it as well.

    I have been looking into commodity stocks lately as they are continuing to drop. Everything else seems to be at an all time high right now with the holidays around the corner.

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    1. Hi Jeff

      Thanks for your comment.

      Buying something at a discount gives us plenty of margin of safety when something goes wrong. So it's good that we practice value investing.

      Commodities stock have fare pretty poorly and may continue in 2015 since the USD is getting stronger and this will affect the demand for commodities. Just my thought, but no harm nibbling at them a bit at this low ;)

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  2. Stamford Land is on my watch list too, it really looks like a solid value buy. I'm just concerned that a fresh wave of negative property sentiment will drag down many property related counters.

    I'm just nitpicking to optimize my small warchest, hehe. But like you said, for those with a longer view, I really do think that this is already at a very attractive entry point!

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    1. Hi GMGH

      I suspect it may go lower as you said when Australia sentiments are not very good. You may be able to purchase them at a lower price.

      Like you said, I think I will add to this counter a little at a time and see how things are going. No point rushing them too much. If they decide to maintain their 3 cents dividends, it's not too bad though compared to the majority out there.

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  3. To be honest there many property counters trading at a big discount to book value.
    Stamford Land is one of the hot stock being pushed on value buddy forum, but I think its a value trap(looks cheap but very low returns)

    I think the chances of the full nav to be realized within 10 years is very slim, probably under 10% as the management seems more comfortable sitting on to it than selling out.

    ROE is also very low, so unless they get bought out, it would probably under perform the STI.

    Posters like greengiraffe having been holding it for over half a decade, they keep promoting this stock but still the high nav never gets realized.

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    1. Hi Felix

      Thanks for commenting.

      Many people are looking at this stock from an upside point of view, I am actually looking at it from a protection downside point of view.

      I agree with you that there are countless property developers stock that are trading at a massive value to their book value. Again, sentiments are poor at the moment and I am looking more from the limited downside protection point of view. If market sentiments were buoyant like what happened in 2007, then property developers would not trade at this price. They are almost trading more than 2x the book value.

      5+% yield is decent to me. I don't expect much from this.

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    2. I see, thanks for the reply
      and yeah for downside protection the 5+% yield would definitely be a good support.

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