Saturday, November 13, 2010

Something About Top Global

This link from Friday's Business Times, extracted below, is worth a read. My opinion is that there are good and bad stocks that are run by Indonesian families. L&M is a good example. The latter was a contruction company that was part of the STI for a while before the stock tumbled and enter Judicial Management. It has since been reborn as Seroja Investment, but after much grief to those shareholders who had to endure a stock consolidation. Nonetheless, Top Global can give gains to those who are prone to gambling as it has all the characteristics of a punting penny play. Buy beware.

Can Top Global live up to its name?

AS Top Global, the Catalist-listed company that has transformed itself into a property group, continues to hog the trading limelight, a question uppermost in investors' mind is whether it is capable of launching a meteoric rise to the top, living up to its ambitious tag.
Top Global, which is now run by Sukmawati Widjaja of the famous Widjaja lineage, recently caught the attention with its triumphant $250 million bid to develop an iconic site that includes Capitol Theatre, Capitol Building and Stamford House through a consortium.

The partners - including Pontiac Land's Kwee Liong Seen and Pua Seck Guan, founder of Perennial Real Estate Group and former chief executive of CapitaMall Trust Management - plan to invest about $700 million in total to develop the site into a hotel, theatre, and retail and residential area, with half the 542,382 square feet of maximum gross floor area for retail and entertainment use, and 25 per cent each for hotel and residential purposes.

This is quite a coup, considering that the consortium beat out 13 other bids, many of which came from the heavyweights of the property scene. The tenders included three bids from Far East Organization alone, one from CapitaMalls Asia and CapitaLand, GuocoLand as well as YTL Corporation.

Some praised the consortium for its ability to use a strong design concept to beat out the competition. The heavier weightage on retail and entertainment matches Top Global's belief that the retail business will drive the Singapore market with the two new casinos, it said in its half-year fiscal report in June.
What, then, bears greater significance in analysing Top Global's prospects is the new leader behind Top Global.

Mdm Sukma, as she is known to some in business circles, has been able to draw in business partners and clinch a headline-grabbing project in the short span that she has been with the company.
Should this be of surprise? No, given that Mdm Sukma has been in the property scene with the family business, Sinar Mas, in Indonesia for decades, developing the Westin hotel on Shanghai's The Bund, among other projects.

She is said to own hotels in Indonesia and China, and noted in a BT interview early this year that she sees opportunities in Singapore, China as well as Indonesia, and has 'a lot of friends' - a comment that's unlikely spurred by some popularity charade. She was also open to Top Global working with Sinar Mas, though that remains speculative for now.

The network that Mdm Sukma commands has not only led to this partnership for the Capitol site, but has also created links with Chinese investors to initiate the company's push into China.
This expansion appears to have gathered speed over the past two weeks.
Through a joint venture, Top Global plans to set up a company in Beijing to secure exclusive rights to lease and acquire hotels near transportation points, such as airports and railway stations, in China. It wants to then set up and manage an investment fund to acquire these hotels, with the intention to list the joint-venture business.
Separately, it has plans to develop a plot of land on an island governed by Shanghai that can be developed for residential, retail and commercial use.
With development cost expected to hit $900 million, the project - whether solely developed by Top Global or through partnerships with other investors - will be something to watch.

In its half-year financial report, the company said it remained positive about the China property market. While the authorities are stepping up efforts to curb real estate bubbles, the real demand from middle class homeowners is still strong, the firm said and as Mdm Sukma had alluded to, after spending $16.8 million to buy a near-60 per cent stake in Top Global this year.

But what must be highlighted is that the finer details of its plans in China are still unclear, especially since the $900 million development in Changxing Island, Shanghai, is based on a non-binding agreement for now.

It also remains to be seen whether Top Global's optimism about China is well placed, given pressure to cool the red-hot property market.

Keen interest in Top Global's prospects should also be weighed against the fundamental strength of the company.

Because of the overhaul of the former construction company, Top Global is currently loss-making. It chalked up a net loss of $7.37 million for the half-year ended June 30, against a slim profit of $45,000 a year ago, though this was due to costs booked from the restructuring of the firm and provision of bad debts and warranties for some construction jobs.

It had $22 million in its cash hoard up to that point, thanks to Mdm Sukma's fund injection, and zero borrowings. And of course it had raised funds from a recent rights-cum-warrants issue which in a maximum-subscription scenario (including the exercise of warrants) could raise some $124 million.
This means it can stomach some debt that it will need for impending property projects, especially with the Capitol development, but it will also need investments and cash from its projects to come through in a timely manner.

Top Global has the long-term potential to become a regional property player, as envisaged by Mdm Sukma. The company, whose stock is trading at 1.5 cents apiece, has plenty to work with that would take it past the mark of average, and to new heights. But despite the promising start, investors should watch for stronger signs of how the firm manages these projects in strategic and financial terms, before deciding if Top Global can truly live up to its name.

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