Friday, March 11, 2011

Divest CapitaMallAsia to Ho Bee

Divest CapitaMallAsia to Ho Bee just recently. Made a small loss as my average price is 1.85. Believe the future capital gains of Ho Bee will offset and reap in better rewards.

Initially I was optimistic on CapitaMallAsia prospect, given that they had plans to expand in China and that the price was trading below IPO of 2.12. On hindsight, I could have sold at $2 for minor gains when the price shoot up.

Though we understand the retail market in China has untapped potential especially the inner cities (consider the demographics, income and expenditure patterns of the mid-to high income Chinese - luxury goods purchases for example), however I expected the time frame to be longer for CapitaMall Asia to reap in realized profits. At the moment, the ROE back to investors is single digit, lesser than 10%.

On the other hand, there was country risk (i.e. China) and element of unknown into uncharted retail waters (not proven success) amongst some of the challenges involved. This included changing government policies, widening income disparity and rising inflation. Not forgetting CapitaMall Asia 4 property assets in Japan which the latest Tsunami case may cause damages.

I have factored in all the key criteria when I bought into CapitaMallAsia. Somehow, there may be a chance that the price falls below 1.70 and if the valuation is attractive, the cost returns can outweigh the risks. One main point of defining "attractive valuation" is the NAV. According to Share Investor, NAV for FY2010 is 1.50. And if it is trading way below NAV, I may consider CapitaMallAsia again.

Right now, I am happy to hear Ho Bee latest news:

- Property group Ho Bee Investment said on Tuesday it had
started building offices at One-North, Singapore, and the total
cost is around S$820 million ($647 million). The project is
expected to increase its recurring income by four fold when the
towers are fully occupied, the firm said.

- Ho Bee Investment expects its new office development at One-North in Buona-Vista to yield higher rents than initially projected, due to the growing demand for office space.

- The company says the development will comprise two office towers that will be completed in the fourth quarter of 2013.

- We are targeting bioceutical, healthcare, IT infocomms, oil, gas, commodity even financial backroom to be located here", added Mr Chua.

I do not based on news alone. Rather, an in-depth qualitative and quantitative knowledge of Ho Bee led by Mr. Chua will help equip me a better informed decision. That, I have already done so because of my past investment on the Sentosa Cove story.

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