Genyi Posted March 28, 2015 Share Posted March 28, 2015 The Annual Report 2014 was released yesterday: http://fb.etnet.com.hk/ca-report-e.html Link to comment Share on other sites More sharing options...
heisenberg Posted March 28, 2015 Share Posted March 28, 2015 From the annual report, outlook section : "The Group’s current business strategy is to fully capture all the growth potentials of the food and catering business in the Greater Macau Area (being Macau, Hengqin Island and certain parts of Zhuhai city). This strategy would lead to the Group continuing to sustain considerable labour and rental cost pressures in this year." The message is loud and clear : this year again will be all about increasing market share and decreasing earnings This CEO is building an Empire Link to comment Share on other sites More sharing options...
yadayada Posted March 28, 2015 Author Share Posted March 28, 2015 I dont think you can give negative value to Hengqin, that does not make any sense. If the project would be finished today and sold, it would get between 15k and 40k per sqm. So that would mean the project would be valued between 750m-2bn HKD. And this is still a big discount to Macau or HK land values. I dont see how you can give negative value to that ? If it is paid for, and has no net debt? If you take the 500m$ macau property and cancel out the debt against that, and give it a big discount it counts as zero on the balance sheet. As for Hengqin. 130m$ is already paid, so they need to pay another 970m$. They will probably sell part of it to a developer. Cash is about 700m$. So Im assuming they spend most of the cash, and get some cash from selling the stake. So they will have a small net cash position since most of the capex investments of opening new places have been made already. They will only open about 20k sqft in 2015. If you look at net cash from operations, that would be about 200m$ backing out working capital changes and the 40m$ loss on their souvenir business. D&A is about 33m$. So that is 170m$, or about 145m$ in FCF backing out the yellow house. So if you give 145m$ a 5x multiple, which is extremely conservative and prices in that the business will certainly shrink, assume like 100m$ of net cash, and another 500m$ for hengqin, there is still upside. And this assumes their food business is fked, and hengqin is a disaster. I dont think 1$ per share is realistic. This really does look like a once in a lifetime, even though the business is not great. Only risk seems to be political, but there is no indication of that. If you price in any chance of recovery, any chance of hengqin being success, any chance of a win in catering gigs and any chance that their food souvenir can be turned profitable, the shares should trade between 4-8$HKD. Vs 1.4$ now. Link to comment Share on other sites More sharing options...
whistlerbumps Posted April 13, 2015 Share Posted April 13, 2015 Anyone know what happened? Stock up a ton on significant volume and no readily apparent news... Link to comment Share on other sites More sharing options...
yadayada Posted April 13, 2015 Author Share Posted April 13, 2015 All my hong kong stocks are rallying, so probably has something to do with that. Chinese exchange up a lot as well. And Macau is stabilizing, as numbers in march were a bit better then in february. Link to comment Share on other sites More sharing options...
Okta Posted May 4, 2015 Share Posted May 4, 2015 The stock trades in line with Macau casino stocks. I can't explain the huge move today, though. No company specific news. http://www.bloomberg.com/news/articles/2015-05-04/macau-s-casino-revenue-falls-39-as-china-graft-probes-expand Link to comment Share on other sites More sharing options...
Laxputs Posted May 4, 2015 Share Posted May 4, 2015 Not sure either. Related stocks did not show comparable price action. Couple reports came out May 1st, that's all I can see. http://www.reuters.com/finance/stocks/analystResearch?symbol=0703.HK Link to comment Share on other sites More sharing options...
Golden Geezer Posted May 6, 2015 Share Posted May 6, 2015 Interesting to see this second (and welcome) bounce. There seems to be a bit of a rebound for Macau stock, as Paradise Entertainment (also worth a look at its current price) is also doing well. Based on the recent volume, I assume some hedge funds are positioning themselves for a Macau recovery, with a focus on Macau stocks well positioned to benefit from the China mass market. The April Macau gambling statistics were in line with what market expected (http://macaubusinessdaily.com/Gaming/Dead-Cat-Bounce) and the China State Council also recently released (on 20 April) framework plans for the new Free Trade Zone in Zhuhai/Hengqin - which will benefit FBH. See http://macaubusinessdaily.com/Politics/Big-dreams about the inauguration. My hunch, however, in respect of FBH, is that discussions must have started with large real estate developers about the co-development of FBH's Hengqin food plaza (which may explain recent volatility). The timing would be right, based on what they mentioned in their last financial statements on that point. This is mere speculation on my part though, so let's wait and see... Link to comment Share on other sites More sharing options...
whistlerbumps Posted May 8, 2015 Share Posted May 8, 2015 Q1 takeaways Results tough as expected given macau weakness but not as bad as feared. I was pleased to see positive PBT even when burdened by food souvenir losses, huafa losses and huge declines at their most profitable restaurants. Hopefully this is what the worst case results look likeas it is really not that bad. Also pleased with the comment that they are aware of Food Souvenir and Huafa losses and may look to close loss making assets. I hope this is a message to investors that they will not continue to pour money into a black hole. Both factors make me a bit more comfortable in downside protection. Anyone else have thoughts? Link to comment Share on other sites More sharing options...
Guest chai Posted May 11, 2015 Share Posted May 11, 2015 Actually, Q1 result is quite a shocker to me . I certainly don't expect the Co to make loss (or barely breakeven). To me, what is somewhat unexpected about Q1 result is the magnitude of the same store sale decline of -21% (pg 5 of the report, - note this figure excluded the impact of new store opening /start-up cost & the losses of other divisions). The SSS decline is a lot more severe than the Macau GGR & tourist visit decrease of -14.3% and -3.6% over same period - I am not sure what's the logical explanation here.. Even if I add back the HK$11.8m food souvenir loss and the HK$11.7m Huafa Mall, the Gross operating profit would only be 39+11.8+11.7 = 61.5m, still c28% lower than previous year at 84.9m. So it seems the cost may have gone up by 23.4m (not sure what's the breakdown on start-up cost vs opex escalation)? Also, it seems the Food Souvenir loss has not reduced from last year? As for Huafa- I recall seeing some discussion on Red's blog that it should somewhat stabilized this year (>6 months since operation), which hasn't been the case. Clearly if these two losses continue (which seems likely, at least for this year), the margin of safety would shrink considerably.. Link to comment Share on other sites More sharing options...
whistlerbumps Posted May 11, 2015 Share Posted May 11, 2015 the company has been pretty clear that Q1 of this year would be very bad....not sure why anyone was expecting anything different given continued macau weakness and ongoing investments in food souvenir and Huafa.... With regards to the SSS, the decline is worst in their higher end Chinese and Japanese restaurants.. given the decline in VIP play this was not that surprising to me... Huafa I think is a 12mth+ ramp up period, not 6. I think the opportunity in Future Bright (if there is one) is the ability to look beyond the weak 2015 results towards a potential future with greater Macau square footage, Henqin, Huafa, industrial catering and either a profitable or shuttered food souvenir business. The only reason why you get a cheap look at that opportunity is because 2015 is ugly. Link to comment Share on other sites More sharing options...
yadayada Posted May 11, 2015 Author Share Posted May 11, 2015 So armageddon basically happens, and they still do fine. Seems margin of safety is not eroding with all those assets on the balance sheet, and a disciplined operator? If they shut down losing operations, and thing pick up a bit, earnings go over a 100m$ again. Let's see how Heng qin will go. Link to comment Share on other sites More sharing options...
whistlerbumps Posted May 11, 2015 Share Posted May 11, 2015 Armageddon happens and they make significant investments for the future... and things still aren't that bad... I agree that the discussion about potentially shutting losing operations was a positive... definitely shows that Chan Chak Mo is focused on profitability and not just growht Link to comment Share on other sites More sharing options...
Okta Posted May 11, 2015 Share Posted May 11, 2015 The wording seems honest. The whole thing is called "PROFIT DECREASE WARNING". This reduces my fear of a fraud scheme going on, as large capex projects in Asia seem to be a way to tunel some money away. Link to comment Share on other sites More sharing options...
whistlerbumps Posted August 7, 2015 Share Posted August 7, 2015 Another profit warning but some positives here. Company is shutting down Huafa food counters which have been losing a lot of money which I view as a positive because it removes the losses and shows that mgmt is willing to make tough decisions. Ex Huafa, Souvenirs, and property business, I see core F&B/Catering/Ingredients business still generating ~22+mln of EBIT in H1 2015 in a pretty horrific Macau environment. Assuming net cash hasn't declined too much, net cash + investment prop + Henqin appears to be worth ~HKD 1.65. 8x current F&B/Catering/ingredients EBIT is another 0.50 so HKD 2.15 even in this brutal environment.. Haircut cash & investment property 25% and Hengin 50% and give no value for business and you get to HKD 1.15 or the current share price. Seems like that should be pretty solid downside protection. Link to comment Share on other sites More sharing options...
Laxputs Posted August 7, 2015 Share Posted August 7, 2015 Q2 2015 I'm getting similar numbers to yours, Whistler. About a 1.76$ MOS after discounting investment properties by 25%, assuming cash hasn't changed much since 2014 AR, calculating about 30% of cash as working capital, returning the rest to owners in a no growth environment. Annualizing depressed earnings of their core F&B biz. The pretty concrete MOS is likely between 1.30$ and 2.50$--somewhere above today's share price anyways. Risks Continued GGR declines which clearly severely affects their core F&B biz. Continued investments into ventures like Food Court Counters which prove to be unprofitable, draining cash flows from profitable segments (perhaps Hengqin, perhaps Food Souvenirs). They are ramping up other restaurants that are likely to be profitable, even in this environment. There is a good chance Hengqin will be worth more than BV, operationally down the road. Chance of Macau GGR growth. Chance of greater tourism growth. Chance of industrial catering to win large contracts. There is very real potential for the stock to be worth multiples of its current share price in a short amount of time with a MOS that looks tangible, believable. We'll see. It will be interesting to see how much cash they have on the interim report and what they do with Food Souvenirs. I've got 14% in this one. Link to comment Share on other sites More sharing options...
physdude Posted August 9, 2015 Share Posted August 9, 2015 I am fairly long (3%) this company and am down nearly 50% but was not too worried given the MoS. However, what has got me worrying is the large decline in the Japanese and Chinese restaurant businesses which I don't think is just because of the Macau slowdown. In particular, the reviews for their Edo Japanese restaurants in Macau on tripadvisor are horrendous and management doesn't seem to have responded to them. That is quite disconcerting as a lot of their profit currently comes from these restaurants. I am still holding as the risk/reward seems good if management pulls through but their performance is not looking all that good as of late. Link to comment Share on other sites More sharing options...
yadayada Posted August 9, 2015 Author Share Posted August 9, 2015 I hope they will score some contracts on these new hotels/casino's. That will add up really fast. This possibly happening is not baked in at all into the price right now. Link to comment Share on other sites More sharing options...
Laxputs Posted August 19, 2015 Share Posted August 19, 2015 No shortage of negative news affecting FB and thus the new 52 week low: http://macaudailytimes.com.mo/economy-gaming-operators-stocks-dented-by-weakened-chinese-currency.html http://macaudailytimes.com.mo/gaming-alert-money-laundering-in-goas-casinos-and-the-macau-experience-report.html Link to comment Share on other sites More sharing options...
investor-man Posted August 19, 2015 Share Posted August 19, 2015 No shortage of negative news affecting FB and thus the new 52 week low: http://macaudailytimes.com.mo/economy-gaming-operators-stocks-dented-by-weakened-chinese-currency.html http://macaudailytimes.com.mo/gaming-alert-money-laundering-in-goas-casinos-and-the-macau-experience-report.html well, I bought more last night :) Link to comment Share on other sites More sharing options...
heisenberg Posted August 21, 2015 Share Posted August 21, 2015 I have turned bullish on this one The ugly conditions I was mentioning in my previous posts have turned for the better. GGR is stabilizing, Macau policy has turned pro-business, cost side rents/wage stabilizing...overall one last PW and we are done A quick calculation : f&b/catering = 8 times (Annualized H1 EBIT discounted by 25%) = 0.375 cts Discounted Henqin/properties/cash = 0.65 cts Worth 1 in a worst case Worth 2 if things stable going forward Worth 3 if business starts growing again Worth 6 if management becomes shareholders friendly ( closes food souvenir shops, buy back shares at current levels ) do I simplify a bit ? Yes I do but it is really not a complicated case I've never seen investors that bearish on HK/China in my life ( I work in finance in HK since 2004... ) Link to comment Share on other sites More sharing options...
Laxputs Posted August 21, 2015 Share Posted August 21, 2015 http://macaudailytimes.com.mo/weak-yuan-stacks-odds-against-flagging-casino-revenues.html Here's what I think the market sees: 50% of visitors to Macau are Chinese so if there is an economic slowdown there will be less tourists. The government has shown their willingness to crackdown on gambling in Macau. The yuan devaluation will hurt casino revenues. In reality, China is continuing to grow, even if it's at a more modest rate gong forward, and even with haircuts to land/property, you could liquidate the company for above today's price. Link to comment Share on other sites More sharing options...
Golden Geezer Posted August 21, 2015 Share Posted August 21, 2015 I agree with the analysis by Heisenberg above. This is very cheap, and they have a sufficiently flexible business model (e.g. by closing non-performing businesses, as they have just done for the Huafa food courts), yet they're priced for liquidation. Their core F&B business remains in a decent shape, in an incredibly tough Macau environment. A slight increase in GGR and the turnover in the high margin Japanese restaurants will improve. My sense is that the stock is getting caught in the general rout in HK/China and the market is anticipating the announcement that no dividends will be paid this year. The board of directors meeting will take place Monday so we should be getting a further update thereafter. The previous release mentioned "more updated business development" following this meeting. Any positive news from a food catering or Hengqin perspective could have a big impact. I think building in Hengqin is supposed to start in November. The risks are: (1) anything relating to their high profile chairman (2) taking the group private whilst its so cheap (3) dilution in order to fund Hengqin. Link to comment Share on other sites More sharing options...
whistlerbumps Posted August 24, 2015 Share Posted August 24, 2015 Here is how I calculate pro-forma H1 F&B & Catering EBIT. I would be interested if others disagree. GOP - Administrative + Souvenir + Huafa - Property Revenues 67.1 - 75.5 + 31.4 +22.5 -15.1= 30.5 I think this number is important as a way to keep track of the performacne of the core F&B business which can sometimes be hidden by the other moving pieces. 30mln in H1 is ~60mln annualized. At 6x EBIT = 0.52 per share. + Cash (0.13 @ 25% haircut) + investment prop (0.58 @ 25% haircut)= 1.22 at depressed results and pre Henqin. Or another way, Cash + Investment prop + Henqin (0.20 @50% haircut) = 0.91 with no value for the core business... Obviously price can go anywhere in times like these but seems like value is pretty well protected above current levels. I would be very interested in any disagreements with this analysis. Link to comment Share on other sites More sharing options...
yadayada Posted August 24, 2015 Author Share Posted August 24, 2015 What a slaughterhouse. I think the only way to lose here is if this is somehow a fraud. Gambling industry usually proves pretty resilient. If I could id load up a lot of shares at these prices. Link to comment Share on other sites More sharing options...
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