Abaci's Common Sense Investing

Thanks Anonymous for his extensive comments (can be found under my original post) which is exactly what I hope for when starting this blog, no flame but healthy discussions on stock picks. (If you can please leave a name next time as it's easier to communicate. I don't believe this is your last post rite?)

In response, I'm starting a part II because there's quite some information I want to supplement.

The Repulse Bay project of 'Aunt Sweetie' is really a disaster but she is either already too rich or too busy going to courts to care about that. Albert Tong on the other hand should have more aspiration at his age, I hope.

In HK, while many wealthy families choose to live on the Island South and the Peak, some opt for large expensive apartments on the mid-level like Albany and Regence Royale (by Hendersen). Lee Shau Kee for one still lives on Macdonald Road. I don't have supporting facts but I guess there are also large and expensive apartments in Manhattan. I think convenience is a factor and the city view has an allure to some.

The asking price of RMB10k per sqft. is definitely too high for now, as already proven by the poor sales. This is not debatable. But one can't dispute either that the company is very cheap right now. At the current share price it's like buying the whole Tomson Riviera at only RMB2.3k per sqft., and the remaining assets of Tomson come free. If you assume a fair price of RMB5k per sqft., then Tomson is at least 50% undervalued. Although we don't know how long it'll take Tomson to clear its stock, in any case it has no financial pressure to do so, the value of the property while unsold will still appreciate over time, as a result of improving market conditions or RMB appreciation or both. I can't predict the extent of the rise of the market (i'm of course a bull in property!) but my guess is it will more than compensate for my waiting. Take a conservative guess, say Tomson sells out all units exactly 3 years later and at only RMB5k per sqft., this will be 100% return over 3 years or 25% annualized return.

There are many who share your skepticism and are waiting on the sideline. Opportunity cost is high in a bull market so it's natural people adopt a wait and see approach. After all, Tomson has done a CB to institutional investors before and its property was once put on a global tender, so the stock can't be called an undiscovered gem. So whoever wants in should have gotten in already.

I never go all offensive in investments and tend to keep some asset plays in my portfolio. Since I'm long on China properties, I need some exposure and am much more comfortable holding Tomson with its ready-to-deliver property and discount-to-NAV valuation, than those property counters with a land bank which takes years to develop but already trading at multiple times book value.

DISCLOSURE: I hold 258 at time of writing.