Smart Alec: Kwek Leng Beng

Two years ago, when I was still a wide-eyed intern working at Republic Plaza, I remember vividly that many of its long-term tenants were vacating it in favor of Guocotower. I recall wondering how CDL would be impacted and how challenging the situation was at that time. Fast forward two and a half years and Republic Plaza is having a $60mn facelift and CDL share price has skyrocketed >30% given the bullish sentiments in real estate and aided by the latest proposal to privatize its sister company Millennium & Copthorne Hotels (M&C).

What really surprised me was the speed at which the bulls pushed up prices. What really helped this time around was the record number of enblocs at record valuations. Property developers are a good bet after a prolonged market downcycle, as their lumpy earnings and initial capital outlay drive down sentiments in a property downturn. However, during a recovery they are also usually the first absorbers of conserved liquidity.

Counters missed: Tuan Sing, Far East Hospitality trust, Straits Trading Co.

Learning point:

  1. Real estate with good locations form a prime moat around a company.
  2. Valuations should take a 3-5year time horizon, waiting for that 10-20 cents drop in prices can be pennywise but pound foolish. “When to buy” should not overrule to “buy or not”

In 4 years

  1. Amberpark enbloc was a good deal for CDL. If the market goes into depression it would be a good time to take a look.