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Stockwatch: G&W Group featured in The Edge Singapore, still trading below net cash

Key highlights of The Edge Singapore article:

1. MD and CEO, Koh Tiak Chye, was conferred the title of Honorary Citizen of Shenyang in 1997, in recognition of his efforts to promote the city as an investment destination to Singapore companies

2. In 2004, Koh was appointed the regional representative of the Liaoning/Shenyang Steering Committee Member of Network China, a trade promotion unit of International Enterprise Singapore

3. In 2004, G&W launched its maiden property development project in Shenyang, called Sentosa Garden, reminiscent of the company's Singapore roots. The 940 apartment units catering to low- to middle-income buyers were sold very quickily, mostly in 2004

4. To further burnish its reputation as a property developer, G&W has set up a management company to maintain Sentosa Garden, with funding from conservancy fees payable by unit owners

5. Meanwhile, G&W is gunning for a far more ambitious project- the development of "Singapore town" in a prime area in Shenyang. Changbai New Town, covering a land area of one sq km with a gross floor area of one million sq m.

6. G&W has signed an agreement with district government to develop the land as well as to resettle about 3,000 individuals from the area. There are no fees payable under the agreement, but the resettlement costs will count towards the cost of land-use rights.

7. As approvals are yet to be secured from the provincial and central governments, which could be granted this year, it is too early to announce the land cost and potential gross development value.

8. The project will be subject to a tender exercise later, but Koh believes they has the edge. Koh is quite confident of getting the project as they have been working closely with the government planner for the township and have engaged the former chief planner of Singapore's Urban Redevelopment Authority

9. Koh expects the township will be developed in six phases over nine years.

10. Koh's plans for the township also include the establishment of higher-level education centres by Singapore institutions. G&W has set up an overseas education centre in Shenyang, in partnership with Ngee Ann Polytechnic. The centre is targeting an intake of 200 in September for its first programme on logistic management. It hopes to boost its enrolment number to 1,200 students by the third year.

11. G&W is actively seeking a joint-venture partner for the project.

12. Koh expects G&W to take up half of the equity stake in each phase of the project, with the balance to be held by its existing local partner and the new partner. The new partner has to be a Singaporean investor, given the project's "Singapore town" billing.

13. Last year, Koh Brothers and G&W set up a JV firm called Construction Consortium, which boasts an order book of $842 million, was done in anticipation of further consolidation in the construction industry; over time, the company could go on to acquire other construction-related companies and take on other shareholders, but no plans to list the company in the near future

14. Last year, G&W sold half its stake in sesdaq-listed Oakwell Engineering to Draka Group, a cable manufacturer listed in Amsterdam, for $8.9 mil. G&W is looking to sell its remaining stake in Oakwell, which is worth $9 mil at its current market price of 5.5 cts per share.

15. G&W is proposing to change its name to "Brothers (Holding) Ltd". The new name reflects the "kinship" he has developed with the people of Shenyang over the years, and at the same time, the name also bears a reference to the Koh brothers.

16. Koh is unfazed about a slowdown in China's already inflated property market. Koh believes that Chinese tend to buy a house first, before acquiring other assets; despite price increase, they will want to buy their houses first.

17. G&W is working on another property project (15% stake) further south in the Zhonglu district of Changzhou in Jiangsu province. The project was introduced by Super Coffeemix, a Singapore-listed maker of instant coffee that counts Sam Goi and Oei Hong Leong among its major shareholders. Details are still being hammering out. Beside Super Coffeemix, the other investors include Goi and two other Singaporeans.

18. At 22 cts, G&W is trading at a seemingly high 29 times 2005 earnings. But that is less than half the company's net assets value per share of 52.5cts, and a 16% discount to the company's net cash holding of 26.3cts per share.

posted by gsg @ 10:32 AM