Popular Holdings

Chou is a driven man, pursuing his dreams in building his business even at the age of 69! I finally think he has a certain flair in developing high-quality, well-designed residential properties. Popular's first project - the "One Robin" - is now practically sold out. The second project - a 19-unit exclusive high-end condo project - at 18 Shelford Rd is now under construction and should be ready for launch and sale in early 2010. I checked out the ground 2 weeks ago, and noted the project also has a distinctive design - at least from the outside. I also noted CDL is building a bigger condo project just next door.

I checked out the One Robin site again yesterday and found out that, following Popular's 26 Jun 09 announcement giving an update of the project.....
the company has successfully sold off the remaining 4 units in the last few weeks, at an average price of $1,400 p.s.f., or approx. $2.7m per unit with a build-in area of 1,900 sq. ft.

I was also told that the 2nd project at 18 Shelford Rd will be launched shortly, at about the same pricing of $1,400 p.s.f. It certainly looks like Popular's residential projects will likely bring in some decent profits going forward, on top of a almost certain write-back of a substantial portion of the provisions taken in last FY on its property projects.

All these properties now seem so cheap, when u compare with Ang Mo Kio's $1150 psf

I accepted Popular because -

1. Their cash-based book shop business in Singapore is solid - most households with primary/secondary students buy from their nearby Popular shops regularly. The same business model is being successfully replicated in Malaysia and Hong Kong.

2. Their scaled up primary/secondary text books publishing business for the Hong Kong market, and the related assessment books publishing business for Singapore, Malaysia, and Hong Kong, are cash cows.

End last year, as a shareholder I was forced upon to put in more capital by the 1-for-2 rights issue @$0.10/share. Because of the depressed stock market then and the rights issue, the share price had fallen to close to $0.10. When compared with the then and post-rights NAV/share, it became a compelling value investing opportunity to load up, especially so as the new rights shares were eligible for a $0.005/share interim dividend.

Popular's current market cap. of $110.0m (based on 647.0m issued shares at today's closing share price of $0.17) is still very low, when compared with the current scale of the business, asset base, and cash flow. And one must not forget the additional value of the publishing and related assets, which are not reflected on the B/S. The expected write-back of a substantial portion of the $31.16m provisions on property projects taken last FY will strengthen equity and the B/S, as well as NAV/share and EPS, going forward. Take a good look into the FY09 (ended 30Apr09) results, one should be able to better appreciate the value of Popular's business, and perhaps also why Mr Market has started re-rating this counter in the last 4 months.....

I think it is relevant to note that the relatively new Harris Book Store (English books) operations, including the 3 small shops opened in the new Terminal 3 of Changi Airport, have suffered some start-up losses, which have dragged down the profits of the entire book retail/distribution business in FY09. Quite clearly, CAAS has pushed the retail idea in Changi Airport too much, and with the opening of T3, the retail business volume in Changi has been spread too thin, to the sufferings of all the retailers there. Given enough time, I think Harris should become profitable.

Based on Popular's accounting policy, rev. and profits from One Robin will only be booked in FY2010. So we can expect a boost on rev. of some $44.0m, and perhaps some $6.0m (based on a 15% profit margin) on PBT, in FY2010.