To consistently beat the market without taking risks we must always invest “Value stocks”. This is the strategy employed by the world’s greatest investor Warren Buffet. By this process we would be able to identify stocks which will outperform the market. I consider OSEA as value stock by using the general steps used to identify a value stock. I have summarized my analysis on OSEA below:
1.It should be a great business: A great business is one in which we could confidently forecast the profits of the company. OSEA, continuous profitability from 2005 to 2010, both in terms of revenue and fair value gain. World Trade Centre is the premier business location in Sri Lanka, as at to date WTC unmatched by the standards by any business locations in the country. Further the Company has launched the 2nd phase of Havelock City Project. With 75% of the apartments of the phase already sold out. The high built quality of the apartments which boast the largest green space and car parking ratio of any development in Colombo are characteristics that will continue to attract many discerning buyers to HC. Undoubtedly the business is a Great business.
2.Undervalued –Trading at a Discount to book value. This is the most important fact for me. Price to Book value =15/26.67=57% I.e. the stock is infect trading at a huge discount to the book value (44% discount to the book value) PE ratio= 15/1.23=12, fairly priced, but compared to the stocks in the land & Property sector , still underpriced.
3.Durable Competitive Advantage: When we look in to the business model of OSEA, it is very unlikely that another entity to build futuristic cities such as HC or places like WTC, due to Capital requirements, location, business ethics, etc.
4.Future Growth Drivers: Havelock City Phase II, ambitious plan to complete in three years. Once completed It will consist of approximately 1,080 residential apartments, a commercial complex, recreational and entertainment facilities, in line with its ‘City within a City’ concept. Structured Growth Plan leading to higher ROE to stakeholders. rise in income level, co
5.Conservative Debt: Low level of debt. Total Borrowings to Current Assets- 2,876/6275=45%, which means that 45% of current assets is sufficient to pay off the borrowings of the firm.
6.Management is buying/ holding stock- The major shareholders Shing Kwan Investments Co. Ltd has subscribed fully for the recent rights issue and also subscribed for un paid rights, Which is a strong indication for the confidence in the company by the stakeholders.
I am in the process of collecting OSEA, and wanted to share my analysis for further expert comments and suggestions.
WTC occupancy rate may reach 85% by year end
Sri Lanka’s premier property development and investment holding company, Overseas Realty Ceylon Plc (ORC) says that occupancy levels at the World Trade Centre (WTC) in Colombo is expected to reach 80 - 85% at the end of 2011 from about 72% level maintained at the end of year 2010. According to the firm’s Annual Report for the year 2010, the company during the year 2010 had benefited from increases in both occupancy at WTC and average rental rates, a clear indication of an uptrend in business optimism and confidence.
“Given the stable political environment and its premier position as the most sought after office space in Colombo, the company expects occupancy levels at the WTC to reach 80 - 85% at the end of 2011,” the Management Commentary passage in the Annual Report outlined.
It stated that although occupancies averaged above 80% through 2006-2008, despite the unstable environment in the country, occupancy in 2009 declined to 68%, a significant drop from the average occupancies witnessed in the prior years. This had been due to the adverse security environment prevalent in the country and the global financial crisis, which saw several companies engaged in exports, airline services, telecommunications and IT either downsizing or shifting from the WTC to mitigate the impact of the crisis.
“However, the end of hostilities in May 2009 has brought about an unprecedented optimism in the country. This, in turn, has resulted in an increased demand for quality office space, leading to a rise in occupancy levels to 70% in 2010 with committed occupancy of 72% at year end,” the report noted.
It stated that the year 2010 saw the addition of a high standard gym for use of the company’s tenants while work has now begun on a food court with expected completion in the second quarter of 2011.
Meanwhile, the report revealed that during the year 2010 the firm was able to obtain higher rental rates from new tenants and were able to increase rentals in a year which saw the average rental index rising to 159 from the average rental index of 150 in 2009.
Last edited by Quibit on Mon Nov 04, 2019 7:39 am; edited 2 times in total (Reason for editing : thought the news update on bottomline would be beneficial to the members)