Pursuing a Spinoff Strategy

Tuan Sing finally moving up following the recent sale of a 13 per cent stake in its 44.5 per cent held China-based Gultech Jiangsu to private equity investors for some S$90 million.

The group has a market cap of over $550 million, and an NAV of 97 cents. It closed at 47.5 cents on Wednesday.

The company posted an 80 per cent surge in net profit to S$60 million for the year ended December 2020. And this number will surge 3-fold to some S$180 million this year, thanks to a gain of some S$160 million from the S$500 million sale of its Robinson Point property.

The sale will boost Tuan Sing’s NTA per share to $1.04, from current level of 93 cents.

Other property projects such as Peak Residence, Opus Bay, Kandis Residences and Mont Botanik will also contribute to the bottomline in the coming years. Meanwhile, work is in progress on its Batam Marina City, an 85 ha integrated mixed development.

It also gets recurrent income from rentals at 18 Robinson and Link@896, while in Australia, it controls Grand Hyatt Melbourne and Hyatt Regency Perth.

But what is enticing the market to its stock is the Gultech Jiangsu IPO story.

The two buyers of the Gultech Jiangsu stake - private equity groups Yonghua Capital and Wens Capital - are investors with proven track records in the pre-initial public offering space.

Yonghua Capital is part of the Yongjin Group, which has nearly 400 billion yuan in assets under management. Wens Capital is the investment arm of Shenzhen-listed livestock and poultry farming company Wens Foodstuffs Group, and has a huge portfolio which includes early-stage, growth and pre-IPO companies.

Having bought into Gultech Jiangsu, they are planning to lead the company to a listing by next year.

Market watchers reckon this could significantly boost Tuan Sing’s valuation (some estimates put the NAV, post Gultech Jiangsu listing, at S$1.50) and be a catalyst for strong upside for the stock.

We put some basic questions to Tuan Sing’s CEO, Mr. William Liem:

1) Any possibility of distribution in specie of Gultech shares to Tuan Sing shareholders? What type of timeframe looking at for listing in China?

Mr. Liem: As Gultech is not 100% owned by Tuan Sing Holdings, there is no possibility of distribution in specie of Gultech shares to Tuan Sing shareholders. A listing of Gultech is expected within the next 24 months.

2) Tuan Sing holds approximately 125 hectares of land in the integrated mixed development township, located in Batam, Indonesia, as reported. Given the company’s view on the attractiveness of its integrated development township, the company said it would develop such a large scale project in phases, with the first launching in 2H20, and will ramp it up according to demand.

Any updates on this township development in Batam?

Mr. Liem: All work-n-progress

3) With regards to the recent Robinson Point sale, how does it impact Tuan Sing’s books?

Mr. Liem: Here are the financial effects as below from the sale of Robinson Point:

4) What is the value proposition of Tuan Sing for investors?

Mr. Liem: Tuan Sing is an undervalued company. In the hospitality sector, our two hotels in Melbourne & Perth are recovering/benefitting from domestic travels and travel bubbles. We can see some light in Australia as opposed to other countries.

The proceeds from the completion of 39 Robinson Road and the partial divestment of our stake in Gultech will also enable the Group to strengthen our balance sheet through an increase in cash balance and a reduction in our gearing level.

In addition, as we reposition the company from a niche developer to a major regional player with a presence in commercial, residential and hospitality properties, we continue to expand our presence in growth countries such as China, Australia and Indonesia, and develop our existing pipeline projects in the region.

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