Propnex A Value Play- Is Spore Property Prices Correcting?

Contributed by: The Big Fat Whale

• Propnex is trading at a PE of 11 and a dividend yield of 7.6%
• They have the largest amount of agents in Singapore
• Earnings have fallen by 18.8%
• Propnex Price has dropped 32% from their peak
• They have an impressive Return on Investment of 37%

Propnex has been a stock on our radar due to its great return on investment metric. Sadly, we have missed the good run that they had over the past 2 years. So with the recent correction in price, is it turning into a value play?

The stock market is a forward-looking proxy for the economy. Is the recent weakness in the price of Propnex an indication of a correction of Singapore Property Prices ahead?

We did an article on a likely property crisis in late 2022, and we still hold to the view that our thesis is valid.

We will dive into the different elements to hopefully unearth some useful insights. More importantly, we would like to know if Propnex at its current level is an investment worth considering.

 Property Price Trend- Singapore

Source: tradingeconomics.com

Let us first have a look at the property price trend in Singapore to have a better feel of the general direction. Looking at the URA Property Index which has done a coverage of private home prices, we are still seeing an uptick in the prices.

There was a slight decrease in 2023Q2 but for 2023Q3, the prices reverted back to their uptrend.

Looking through the charts from 2000, there were 3 evident corrections for the Singapore Property Market. They are in the early 2000s (9/11 and Sars), 2008 (Global Financial Crisis) and 2014 (Euro Crisis).

Source: HDB

The HDB (Public Housing) Price Index is showing an even stronger upward trajectory. There was no drop in prices for 2023Q2.

In essence, Singapore property prices are still in unchartered territories by reaching new highs. Even with the upsurge in interest rates, the government's restrictive policies (literally at 60% taxes for foreigners to buy a property- it has killed the interest of this segment), and big tech layoffs, the property market has remained resilient.

Click here for the Full Article:

https://thebigfatwhale.com/propnex-value-property-prices/

 

Is Paramount Warren Buffett’s Greatest Investment Mistake?

Contributed By: The Big Fat Whale 

• Buffett's Position is Down Close to 60%
• Streaming Business is still in transition
• Huge One-Off Losses from Programming Charges of 2.4 billion dollars
• An Interesting Turnaround Play

 

Paramount has been on a downward spiral since the start of 2021. Even Warren Buffett's endorsement and investment does not aid in slowing the decline. Berkshire Hathaway, as of this write-up, has a 15.4% stake in Paramount which makes it the biggest shareholder.

Based on Barron's estimate, Berkshire got their Paramount stake (93 million shares) at an average price of close to $30. Based on the current price of $12.5, Buffett is down by close to 60%.

The boiling question will be:

Is Paramount going to be Warren Buffett's Greatest Investment Mistake?

 

Video Streaming Industry Growth

Source: Statista

We have no doubt the streaming business is an extremely competitive industry. Only Netflix is able to churn out profits at this juncture.

Also, to keep consumers engaged, new content has to be regularly created in order to prevent subscribers from leaving their streaming network. So all these will require massive investments, not unlike the airline business. Amazon has budgeted 15 billion dollars on content creation for 2023.

Statista estimates that the revenue in the Video Streaming (SVoD) market is projected to reach US$95.88bn in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 9.47%, resulting in a projected market volume of US$137.70bn by 2027.

Grand View Research is more optimistic and is projecting an annual growth rate of 21.5% till 2030.

Source: FlixPatrol

Looking at the subscriber numbers, there is lots of room to grow for Paramount as they are currently in 7th position. With the combination of Paramount+ and Showtime, it would make it a more enticing package for consumers to onboard to Paramount's streaming offer.

However, we are of the view that consolidation is likely as there are just too many players. With the price war to gain market share, it will hurt the bottom line and only the fittest will survive. This explains why only Netflix is able to net a profit, likely due to their economies of scale.

Click Here for the Full Article:

https://thebigfatwhale.com/paramount-warren-buffett-investment-mistake/

Will Country Garden Collapse with their Debt Load?

Contributed By: The Big Fat Whale

Recent headlines from major publications such as Reuters, Bloomberg, CNA etc., have painted a bleak outlook for Country Garden. It seems to point that they would likely default on their debt which could potentially lead to a collapse of the whole company.

Country Garden was the largest real estate company in terms of sales in China last year. They generate 96% of their cashflows from real estate sales.

Headline numbers put them in debt of 196 billion US Dollars (1.4 trillion RMB). There have been also delays in the payment of interest on bonds and postponing the repayment of a key loan.

With the slowing of China's economy coupled with inflationary pressure on construction costs, it has been a tough time for China developers. Country Garden is also not in the most ideal target segment, 60% of their property projects are located in 3rd to 4th-tier cities.

This is the segment where prices have fallen the most and the target buyers have low purchasing power.

We decided to have a look at their financials to have a better sense of the situation. Before we move into the numbers, let's look at the background of Country Garden so we can paint a better narrative of their current predicament.

Background of Country Garden

Yang Guoqiang founded Country Garden in 1992 in Beijiao Town, Foshan City. He built the company from scratch, having previously worked as a farmer and on construction sites.

The company now has interests in property development, construction, fitting and decoration, property management, and hotel operations in a wide variety of global markets.

It was listed on the Stock Exchange of Hong Kong in 2007 with its annual sales exceeding RMB100 billion in 2013. The Company made it to the list of Fortune Global 500 for the first time in 2017.

In 2015, Chinese insurance giant Ping An became the second largest shareholder in Country Garden by acquiring 9.9% of the company for US$800 million.

Forest City Johor Bahru

China made up the bulk of their business with 3125 developments as compared to 31 overseas developments. But what we could relate to when we talk about Country Garden, will be their grandiose Forest City Project that is just across the Causeway in Johor Bahru, Malaysia.

Forest City is meant to be a US$ 100 billion dollars development that was hyped up to be a paradise with turtles and white-sand beaches. To date, only US$ 4.3 billion has been invested and housing less than 10,000 residents. It is a far cry from their 700,000 projection.

Click Here for the Full Article:

https://thebigfatwhale.com/country-garden-debt-load-collapse/

Is ARM IPO Overhyped?

Contributed by: The Big Fat Whale

It has been a while since an IPO has rocked the financial markets. The ARM IPO has been the highlight since its launch last week at the price of $51. At a PE of over 100, is it worth a look at or is it simply overhyped? Let's take a closer look.

Giving some backdrop, Softbank took ARM private in 2016 at a valuation of 32 billion US dollars. Based on their listing IPO price of $51, it gives it a valuation of $54.5 billion dollars. Softbank still owns 90% of the company after this share offering.

The demand has been overwhelming with the IPO shares being ten times oversubscribed but it could be due to only 10% of the company being up for grabs. The first day gain was around 25% with the price touching $64.

 

ARM Business Model

ARM was established in 1990, Arm began as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology. ARM was publicly listed on the London Stock Exchange and the Nasdaq Stock Market from 1998 until 2016 when ARM was taken private by SoftBank Group, our controlling shareholder.

"Our open and flexible business model provides access to high-quality CPU products for a wide range of potential customer types and end markets. We license our products to semiconductor companies, OEMs, and other organizations to design their chips. Our customers license our products for a fee, which gives them access to our designs and enables them to create Arm-based chips. Once a chip has been designed and manufactured with our products, we receive a per-unit royalty on substantially all chips shipped. The royalty has typically been based on a percentage of the ASP of the chip or a fixed fee per unit, and it typically increases as more Arm products are included in the chip. Our business model enables the widest range of customers to access Arm products through an agreement best suited to their particular business needs"

Source: ARM IPO Prospectus

Think of ARM as the architect or designer behind the brain of your smartphone or tablet. They create the blueprint for a type of computer chip called a "processor." This processor is like the brain of your device, handling all the calculations and tasks it needs to perform.

ARM doesn't actually make the physical chips; instead, they license their designs to other companies (like Apple, Samsung, or Qualcomm) who then manufacture the actual chips based on ARM's designs. So they will earn licensing fees for each chip that was produced.

ARM is constantly compared to Nvidia as the two forefront stocks to benefit immensely from the development of the Artificial Intelligence Industry. From what we have read, ARM is more focused on the Central Processing Unit (CPU) whereas Nvidia is focused more on the Graphic Processing Units.

Here are the differences between the two products:

• CPU: CPUs are essential for general computing tasks, running operating systems, office applications, and tasks that require precise calculations and control. They are the primary computing component in most computers.
• GPU: GPUs are essential for graphics-intensive applications, including gaming, video editing, 3D modelling, and scientific simulations. They are also increasingly used for AI and machine learning tasks due to their parallel processing capabilities.

In summary, while both the CPU and GPU are vital components of a computer, they serve different purposes and excel in specific types of tasks. CPUs are versatile and handle general computing tasks, while GPUs are specialized for graphics processing and parallel computing tasks. Many modern computers and devices use both CPUs and GPUs to optimize performance and efficiency for a wide range of applications.

A Publication By The Big Fat Whale

Click Here for the Full Article:

https://thebigfatwhale.com/arm-ipo-overhyped/

Golden Village Cinemas as a Value Play?- Revisiting Investment Thesis

Contributed by: The Big Fat Whale

In an earlier article, we have covered Orange Sky Golden Harvest which is listed in Hong Kong. They are the owners of the popular Golden Village cinemas. They also have a presence in Hong Kong and Taiwan. Their latest foray is into China with a 360 theatre in Suzhou that is meant for live performance- it is able to house up to 2700 spectators.

Source: AAStocks

The stock has seen exciting movements after our article, on a quick upsurge to 18 cents in March 2023 from the 6.5 cents level. It has actually reached our target (18 cents) which was highlighted in our report. It was mainly speculative flow as it has since retreated back. The catalyst was mainly due to the newsflow that TVB is getting their stars to do live-stream sales on the Taobao online platform.

This is our recently published book where we touched on how we go about valuing stocks and our insights into the investment world. Authored by a Chartered Financial Analyst, it encompasses 2 decades of experience in the market that is condensed into this book. Hope you can lend support to our website and gain insights into the world of investment by purchasing the Kindle Ebook (Sample Copy) or the Paperback.

Loss More than Doubled

Source: Orange Sky Golden Harvest Announcement

Recently, the company has seen a further drop in prices to a low of 4.6 cents, which could be due to their latest financial results announcement. The headline number is the loss has more than doubled on a half-yearly basis.

However, the loss has more than doubled because there was a non-recurring gain in the first half of 2022 of HK$56.5 million. If we exclude the one-off gain from the disposal of office property, there was actually a 64% reduction in loss. So things are turning better from the numbers itself.

Click Here for the Full Article:

https://thebigfatwhale.com/golden-village-investment/