Road king infrastructure has been my top-of-the-list for 4 years. It basically subsidised all of my month-long travels in Europe and America in 2017-2019.
I have been selling Road King starting from early 2019, and now my holding is around one-eighth of my highest level.
While Road King is still worth to hold because:
1. constant cash flow from its Chinese Highways ( and Indonesian Highway as well, Which I think is from Solo to Ngawi and Ngawi to Kertosono and potentially to Kediri? .)
2. safe debt-to-equity ratio.
3. nice dividend yield
4. stable housing sales.
5. currently realising some super-profitable projects
But downside risks are :
1. Road king has 3 property projects in Hong Kong.
1a Crescent Green in Yuan Long. While the cost of development is low, land costs around 3k HKD per feet, and sister company "Build King" build the project. The project price is around 14k per sq feet, and it's selling slowly. No doubt this project would turn for a profit, but should less than my original expectation as advertising and commission costs have to be high.
1b Tuen Mun and Wong Chuk Hang Project costs much more and is very expensive to develop. I doubt whether these two projects are profitable under current market situation.
2. Increasingly difficult capital situation for small-cap developer in China.
3. Competition with peer developers, and how long this housing boom can last frankly?
4. RK Invested 190 Million RMB in Ucommune 優客工場 in Series D, a likely loss due to valuation drop regarding WeWork.
I guess 2019FY profit is at best flat,
Selling homes and cash flow from highway have some modest increase, but offset by
1. Drop in RMB value. RK balance sheet is in HKD, no doubt it would cause a drop in profit despite the FX Swap of near 1 Billion USD it has.
2. Home Sales profit margin should decreased overall due to higher land price, but not a similar increase in selling price.
3. Loss on Ucommune.
4. potential re-valuation of HK Property projects, aren't sure about this but it is worrisome. Especially So Kwun Wat Project as the home price there is consistently low.
I will be reducing my position in Wai Kee Holdings as well (which owns 43% of Road King and 56% Build King) Primarily due to Road King.
My position in Build King remains unchanged (and currently overweighed). In the foreseeable future, I believe the government will continue to build unnecessary infrastructures, and Build King is one of the cheapest I can find with reasonable dividend, cash flow and balance sheet.
Meanwhile, I am clearing out Tysan Holdings, which I started to accumulate last August. Thanks to two special dividend total $1.02 last Oct and Dec, the total return is somewhere around 80-100%. I don't think the remaining business worth 3 Billion HKD, so I sold all and only left 10k shares with me.
Start buying last month:
Xinyuan Property Management 1895 , plan to overweight this stock
This company is 60% owned by parent company - property developer Xinyuan Real Estates
15 % owned by the management team, total 75%.
Top five international placing is 9.65% of shares.
So nearly 85% of shares controlled by XIN,management team and 5 shareholders.
Profit margin on its management fee is high ~20%, and its parent developer company (Xinyuan Real Estate NYSE:XIN ) essentially gave all its projects to this company to manage.
currently manage around 97 properties ~15.8 mil sq meters, contracted properties management in the next 3 years: 56 properties, 16.3 mil sq meters, at similar management fee rate (1.7-2.0 RMB per sq meter)
I believe the company can earn at least 80 mil RMB this year, deducting listing cost, it would be around 60 mil RMB. And potentially at least 100 mil RMB next year.
Dividend policy is 30% of profit after tax, so I believe the dividend should be handsome compare to other property management companies.
The company has no borrowings, lovely.
Let's see how cheap it can goes. now is around 640mil HKD, which is quite cheap already.
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