4 thoughts on “Update No. 323 – as at COB 31/05/19

  1. Steve Green says:

    Hi Tony,

    Appreciate you taking the time to let us know your latest thoughts on UOS. I think the Malaysia instalment regime you provided will be helpful to many looking at the stock. United and Sentel Point being moved to 2019 is pleasing to read.

    I also look at the discount as a way to get a higher effective rate of compounding on the price I paid. I don’t plan on seeing the discount narrow substantially and then to take profits in the stock. It is likely one I hold for a long time and take up the DRP. I do regularly look for asset plays in the market where I see a catalyst for the discount to narrow and sell at a profit a few years later, but I don’t view UOS in such a category.

    I thought I came across a news snippet recently that suggested the REIT might take in some of the commercial inventories held. (I think the REIT’s gearing has recently come down). Did you come away with any insight into this potentially happening?

    Hopefully I will make the trip again next year. A bit tricky this year but am still a happy holder of the stock and I don’t think that will change by this time next year.

    Cheers
    Steve.

    • tony says:

      Hello Steve,

      There is much more I could write on UOS, but mustn’t punish my investor group with overly long monthly updates… I think Vietnam is an enormous opportunity, I’d be keen to hear from you if you can do some research on the ground for per sqm rental rates for HCMC A-Grade office space (particularly in District 7 if you can!). If the rates are what I think they are (around US$47sqm per month or US$550-560 sqm per year) and UOS can build their commercial towers there for the price I think they can (FY17 AR put a $58.5m GDV on the 24 story, 48,000sqm UOA Tower – see brochure: https://uoa.com.my/wp-content/uploads/2019/04/uoa-tower-brochure.pdf), then the margins they have the potential to earn in Vietnam are eye-watering. Love to know of any relevant sale prices for A-grade space too – Tony

    • tony says:

      The sale of Wisma UOA Pantai last year has significantly deleveraged the REIT balance sheet. Vertical Tower B at Bangsar South would be the obvious candidate, I understand there are only two floors left to lease (out of 38). Only wrinkle here is the bite may be too large for UOAREIT to still stay within their debt/equity targets. There are some of the UOA Business park building also, which are almost 3/4’s leased now too and may be of a more appropriate size for the REIT – Tony

  2. Steve Green says:

    No worries Tony, I planned to have a bit of a look around district 7 last year out of curiosity. This time last year I thought they hadn’t got too far into commencing their development so I didn’t worry about it. I do plan on looking around there as I hear it is an upmarket area. I don’t stay in HCMC that often though and just finished up there recently. I will be there late September though and plan on having some free time around then so I’ll see if I can speak to some people.

    The rental numbers above you suggested sound interesting. I guess even if they turn out to be too high it seems there is a lot of fat to play with there anyway. They don’t seem to be too unrealistic when I had a quick poke online and saw some rates from some A-grade District 1 properties anyway. But I don’t know all the intricacies about how much displayed prices are a reliable gauge, what other costs / taxes are or aren’t included etc.

    I would hope they could achieve some good margins there as they have such a strong balance sheet. When the market was still terrible in Vietnam around 2013 a lot of players got burnt with the reliance on debt. It sounds promising though that they have had a few years now getting a feel for how the market works in Vietnam and are still keen to do more there.

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