K-Green Trust showed a very weak technicals these week. Originally hovering around 1.10 to 1.13 it broke it off and reached a low of 1.06 today.
One can attribute to very weak EPS vs NAV but is it the case?
Technically we could reached 1.00 but in reality its hard to estimate how low it can go.
Has anything change fundamentally?
- Zero Debts. Good Thing. There is no worries of refinancing issues.
- PTB is 0.95 times. Approaching parity which doesn’t show how undervalued this is.But given the number of assets that is much below book value this looks expensive but perhaps you are paying for not having refinancing and interest risks.
- ROIC and ROE of 7.51% and 6.75% respectively
- EV/EBITDA of 12 times. Not cheap by Starhub standards but it would mean that at this current price you are buying 12 years of current cashflow. An asset like senoko is valid for 15 years with an option to extend for 15 more years. counting the extension this look reasonable.
I will probably add on once support have been found.
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AK71
Wednesday 27th of October 2010
Hi Drizzt,
My latest take on KGT:
http://singaporeanstocksinvestor.blogspot.com/2010/10/k-green-trust-bad-investment.html
puzzlebird
Wednesday 27th of October 2010
senoko's contract is concession contract, means Keppel does not own the factory, but the permission to run it and take the operational profit. In this sense, if concession contract is worth 1 dollar per share today, its internal value will be zero after 15 years. From this perspective, the book value (or internal value) of K-Green is decreasing 5-7% per year, which is not worth holding for long term investment.