Wolf Money(Banyan Group, The Great Mystery part 2)
The below article is for educational purpose only. Kindly refrain from taking any action. It shouldn’t constitute as an investment advice. Please read the disclaimer.
Banyan Group
The Great Mystery part 2
- Undervalued land bank is being monetised
- Conservative accounting
- Supercharged earnings
I have been reading up more on Banyan after my recent purchase. There are a couple of things that come to my attention after going through their latest annual report. The management in an Edge article dated late 2024 mentions the Phuket land is worth USD $4b to $5b. I have decided to do an investigation on their accounting methodology and balance sheet. You can read part 1 here.
I dig further into the accounting rules of Banyan Group. The company kept the land using the cost accounting model. I assumed land bought many years ago is still kept at initial cost minus depreciation. From the screenshot.
If I took a conservative view on the land bank value of USD 1.5b(SGD $1.935b) or 1/3 of the stated value by the CEO. The rnav of the Banyan can be as high as $3.20 SGD with $2.23 SGD hidden from plain sight. I am taking a very conservative approach to my calculations as there is no certainty the Phuket land can be monetised at the desired price. Furthermore, In order to get to that value, the company needs to spend money to make money.
You may be asking why the undervalued land matters now, which has always been sitting in their balance sheet, largely vacant and unoccupied except for a few hotels built on Laguna. Now Banyan Group is selling condos, apartments and villas built on the land. The true value of land can now surfaced through the sales of residential projects. Last year, Banyan Group launched a USD $2b project called the Laguna Lakelands. The whole township will be developed over the next 5 to 10 years, bringing in a steady flow of revenue and profit for the company.
The management did mention the company will be booking of SGD $262m in revenue from properties sold a few years ago(revenue and profit booking on completion method). I have put a conservative 20% net margin on development profit. The net profit from property development alone is close to $52m, surpassing last year’s full year profit of $42.1m. There are profits from hotels and hotel management on behalf of third parties which will contribute to the overall profit. If both units generate a combined profit of $10m. Earnings per share will reached around 7c. Based on the current 11x p/e assuming there is no p/e expansion. Stock would have a fair value of at least 77c just purely on earnings without any additional corporate action.
The casino bill was postponed due to the suspension of the Thai PM. The chances of passing the casino bill are still high in my view as the 36% high tariff imposed on Thai imports by the US has made Thailand less competitive as a manufacturing destination. Vietnam has a 20% tariff rate, which makes them more attractive to foreign investors. Furthermore, the strongest card Thailand can play is in their tourism. The sector accounts for 15 to 20% of their GDP. The question is, can Thailand afford not to have a casino given the weak economy? Probably not. For the benefit of my readers who are new. Thailand is proposing to have 4 casino licenses. With Phuket as one of the possible location.
*Please take my analysis with a pinch of salt as the numbers given contained a high degree of “guesstimation” *Kindly do your own due diligence. Buyers beware.
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All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.
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