Keppel Reit - Undervalued large cap

Upside
In my opinion, Keppel Reit has a potential price of $1.5, a 26% upside from current price. Here is why I think so.

Improving returns
Net Property Income for YTD Sep 2013 increased 9.9% y-o-y to $100.9 million due mainly to improved performance from Ocean Financial Centre and the additional contribution from 
8 Exhibition Street, a premium freehold Grade A office building in prime central business district  (“CBD”) of Melbourne, Australia 

Rental structure

Keppel REIT’s weighted average lease expiry (“WALE”) remained at healthy levels of 8.3 years and 6.4 years for its top ten tenants and the entire portfolio respectively

Capital management
Their debt structure allows for no refinancing till 2015, an interest rate of 2.15% for debt and 75% unencumbered property.

Calendar trend

I believe a rally happens from november to december. So if you are looking at 10% upside, Keppel Reit has a reasonable profile. With a 6.6% dividend yield at current prices, it should provide some cushion to any sudden fall in prices.

Supporting trend

With rental revision for offices expected to rise next year due to Grade-A office crunch. Additionally, Ocean Financial Centre recent TOP - REIT prices may just rise soon, especially with an increased float to 55.4% from 22.5% previously, improved liquidity will help improve prices.

Risks

- Temasek just divested 109.5m shares. (To a smarter investor hopefully?)

- Highly geared at 40% debt/asset ratio (potential rights issue  for acquisitions or cushioning debt may cause sharp share prices fall)

- 99.4% occupied leaves potential for possible defaulting tenants and limited upside of 0.6%.

- Office assets in Australia may be suffering from slowing economy there - that being said, Australian govt. cutting lending rates to 2.5% would help.

Read the latest quarter presentation below.

http://infopub.sgx.com/FileOpen/Keppel.REIT_3Q2013.Results.ashx?App=Announcement&FileID=259745

Blumont and Liongold - What does the future hold for this two resource investment holdings?

Blumont
A share with a phenomenal rise over the last few months. It kept rising from 0.05 to 2.41 before crashing to its now 0.133 share price. Interestingly, a few days before the collapse, while I was on the train, I observed an aunty sitting beside me scrolling through her stock portfolio, one stock she stare at for a long while (like it could make a difference) was Blumont.

A stock that I saw everything that I was against.

- Phenomenal rises in prices for not much reason, at some point, its market cap made it worth more than SMRT or NOL while its largest acquisition is only 45m.
- No key all star management with special connections
- No key businesses but purely rising on acquisitions.

I found some interesting points that may possibly quantify an investments at current price of 0.133. Not at the previous high prices though. It was the unfolding of events plus the contrarian and bargain hunter mind of mine that seeks the cheapest price for the highest value.

At a risk of overstating anything, this is how I quantify things.

Investment highlights:
- Hong Kong-based mining entrepreneur Alexander Molyneux has been named chairman designate. He bought a 5.2% stake with a price ranging from $0.2 - $0.4/ share. So his minimum investment is at least $27m. No small sum for someone who was formerly an MD in Citibank for Investment banking in resources.
- With Alexander Molyneux on board, the company does gain some traction in creating a resource champion, especially with prices of resources at a low price now, it may makes sense to acquire undervalued assets.
-  Platinum Partners will subscribe to redeemable convertible bonds for up to an aggregate principal 
amount of US$200 million at 8.0% p.a.. A hedge fund interest continues to provide more support for its possible business credibility. Proceeds to be used to fund the announced investment in Discovery Metals Limited.
- Discovery Metals Limited is a credible investment, its current price of 0.7, was previously a privatization target by a billionaire. (which failed)

Risk
- Blumont yesterday said its one-for-two rights issue at five cents apiece was over-subscribed by about 37 per cent, raising gross proceeds of some $43.05 million. (The flood of new shares may continue to provide more downside pressure)
- No certainty of strategy. While company has additional $43.05m of cash, the NAV at 0.4 shows that it is valued 3x bookvalue at current price.
- Certain downside may still persist as people are running for cover.

Conclusion
- New chairman, new investors and strategic alliances can help this company to grow. But the lack of clear strategy other than mere acquisitions and aiming for lofty ambitions.
- While I am positive that the new chairman and the investment hedge fund appearance will help the company grow. I remain skeptical of any credible upside unless more funds are deployed through share placements.
- Target price 0.2 (upside of 50.4%)

Liongold
- Former Citibank Investment Banking MD at the helm (a smart dealmaker)
- More quantifiable assets and undervalued by most metrics (compared to similar sizable gold miners in the region and much cheaper than CNMC goldmine)
- Mere acquisitions only, not much good in terms of creating a good strategy. Unless a profitable strategy is drawn out, I remain skeptical of the price. On a pure gold mining value, it could be worth anything around 0.30/share (100% upside)

Disclaimer : Caveat Emptor (Buyers beware), the writer has no positions in this two stocks.

Extra notes on Platinum Partners
PPVAF is a multi-strategy hedge fund established and registered in the Cayman Islands with assets under management in excess of US$700 million and is managed by Platinum Partners 
(the “Firm”). The Firm is a New York based investment management group with more than 
US$1 billion in assets under management. The Firm was founded in 2003 by Mr. Mark 
Nordlicht, an investor with over twenty years of experience in asset management. The Firm 
manages a number of funds, including PPVAF.

Extra notes for Blumont

• Copper (September 2013): Blumont entered into a concurrent convertible bond and equity placement agreement (the “Placement”) with Discovery Metals Limited (“DML”), a copper exploration and production company listed on the Australian Securities Exchange (“ASX”) and Botswana Stock Exchange, for a total investment consideration of approximately A$116 million. Pursuant to the Placement, Blumont acquired approximately 11.56% of the total issued share capital of DML; 
• Thermal Coal (September 2013): Blumont entered into a conditional share subscription agreement to acquire up to 15% of the potential enlarged issued share capital of ASX and Johannesburg Stock Exchange-listed coal mining company, Resource Generation Limited, for a total investment consideration of between A$20.97 million and A$22.11 million; 
• Copper (August 2013): Blumont acquired approximately 10.7% of the total issued share capital of ASX-listed Kidman Resources Limited, a company focused on the exploration and development of precious and base metals deposits within Australia; 
•  Uranium (July 2013): Blumont entered into a conditional sale and purchase agreement to acquire the entire issued and paid up share capital of investment holding company Powerlite Ventures Limited (“Powerlite”) for US$7.88 million (including the assignment of shareholders’ loans of an aggregate of US$4.5 million), giving the Group exposure to uranium projects in Kyrgyzstan and the United States of America through Powerlite’s interests in Azarga Resources Limited (“Azarga”), a major Asia-based uranium development and investment company. On 28 August 2013, the Group announced it was expanding its commitment to the uranium sector by increasing the size of its existing convertible loan facility to Azarga by US$6 million to US$21 million;
• Coking Coal (July 2013): Blumont entered into a conditional agreement to acquire approximately 12.75% of the enlarged capital of ASX-listed Cokal Limited (“Cokal”), which focuses on coal exploration and metallurgical coal production, and has interests in coal exploration tenements in Central Kalimantan, Indonesia and Tanzania. On 7 October 2013, Blumont entered into a binding term sheet to extend a loan facility of up to US$8 million in principal amount to Cokal to fund the continuation of development work at Cokal’s projects; 
• Gold (July 2013): Blumont led a consortium of three partners to enter into a conditional agreement to acquire approximately 43.47% of the enlarged issued share capital of ASX-listed minerals explorer Prospect Resources Limited; 
• Thermal and Coking Coal (March 2013): Blumont acquired approximately 11.5% of the total issued share capital of ASX-listed Celsius Coal Ltd., a coking coal explorer focused on developing coking and thermal coal deposits in the Kyrgyz Republic; and 
• Iron Ore (December 2012): Blumont entered into a conditional sale and purchase agreement to subscribe for 2.5 million ordinary shares, representing the entire issued share capital of Hudson Minerals Holdings Pte Ltd., for a purchase consideration of up to S$48.0 million (including the assignment of shareholders’ loans of not less than S$5.5 million). 

From website (http://blumont.listedcompany.com/newsroom/20131017_225826_A33_A3FB3FCF7EABD2F748257C07004EBD37.2.pdf)

Asiasons Capital - does fortune favors the bold?

Interestingly, this 3 stocks have experienced strong upside momentum over the last few months with blumont gaining the most on an y-o-y basis.

Personally, I have met with the owners of Asiasons before, seen them in person and watched them query private businesses in a 'pitch to the star investors moment'. They are by no means small unknown people, with a wide range of connections, I have been eyeing Asiasons since I met them at techventure 2012 and I found this quite an interesting window of opportunity.

Note the interesting following:
- The management are real, the people are smart and they own a total of 53% stake in the company.
- Private equity and fund management skills are hard to come by, this people have strong credibility and connections, especially in Azlan who is a former Bursa regulator and he sits on the board of M+S (the temasek-khazanah collaboration).
- Asiasons has one of the best run PE funds in the region with an end-to-end operations technique that includes marketing, advertising and website design that enhances value of their investment holdings.

Risk
- Share price have lost nearly 96% of its value from its top of 2.91, no one can quantify the bottom. (Currently at 0.128)
- Share placements, deal-making and other value accretive acquisitions have been put on halt due to fall in share prices
- Stakes in Liongold and connections to blumont and stuff continue to puzzle investors, notwithstanding a fraud collapse. And the last thing investors want is ambiguity which provides more reason for downside (see link - http://www.thestar.com.my/Business/Business-News/2013/10/19/Business-as-usual-board-to-focus-on-repairing-damaged-reputation-Asiasons-is-picking-up-the-pieces.aspx)

Conclusion
- The downside is kinda curtailed with 96% capital wiped, the company Net Tangible Value stands at 0.18, which remains quite a reasonable price on a liquidation basis (upside of 40%). Also, with not many private equity businesses in the region, this could be a multi-bagger in the long run and opens a wide opportunity for acquisitions.
- Target price 0.34 with 3 year horizon

Note : I am vested with a small portion.