Hi,
I think I should start writing down my insights since it's easier to write it once and share.
(The last time I did that was quite a while ago, as you can see).
So what's my latest Stock Interest
Mandarin Oriental (M04.SG)
Current Price: USD 1.97
Background:-
In early June 2017, the company announced that they are exploring the sale of Excelsior Hong Kong at Causeway Bay.
You can click on the link to know more, which is quite a complete article on this development.
http://www.thestandard.com.hk/section-news.php?id=183692
In short, if a sale were to come true, it is estimated that the proceed alone could be around US$3bil - US$4bil (HKD 30,000 psf - HKD 40,000 psf).
The current market cap of Mandarin Oriental is USD 2.48bil, so just selling this 1 asset is more than its entire market cap (They still own and/or manage other hotels in HK and other jurisdictions)
So the question now is, whether the board will decide to sell or not:-
My take is yes, reasons being:-
1) Overall hotel occupancy has been challenging due to a fall in incoming tourists. Excelsior is facing even more challenges as it is a relatively old hotel, although in a good location. Its occupancy hovers around 70+% if I am not wrong.
2) Office rental is still doing well, as compared to hotel industry. Hence we have seen the latest record price for land in Central area, as purchased by Henderson Land. Grade A office vacancy rate is low at around 2%, due to limited supply.
3) Mandarin Oriental is 70+% owned by Jardine and itself (thru Hong Kong Land) is a major landlord/developer in Hong Kong, with 450,000 sqm (4.8mil sqft) of prime property in Hong Kong. Location of this asset is very ideal for office + retail combination, facing the Causeway bay. Lower level can be used for retail while the mid and upper levels can be used for office.
Looking at this situation, should buy now?
My take is not now, but worth monitoring.
Reason being:-
a) If the board chooses not to proceed, then likely the share will come down (as it has shot up quite substantially since the news of the strategic review).
b) Once the board so decide to proceed, while the share may rise to an even higher price, there should still be gain to be made (with more certainty and less risk).
My baseline is:-
You don't lose if you don't buy.
But when you buy, you must have limited downside risk.
Cheers.
