Is DBS really expensive?

For more than a year, I have been thinking that DBS is expensive, the high PB ratio is holding me back. I started investment in late 2015 and in 2016 bought 100 shares of DBS at $13.64 and sold at $20.76. It is not possible to get this low price anymore unless there is a 50% crash. Price of DBS has been hovering between $24 and $26 for a year now. 

If we compare the 3 banks, they have similar  PE,  Price/Cash Flow and ROE, so the price deviation  between the banks should not be too much. I can say the banks are at fair value, yet DBS is trading 30%  above valuation.

From the table, it seem that OCBC and UOB has deviate from its historical PB ratio. The PB ratios, does this mean DBS need less assets than OCBC and UOB to generate the same PE? Of the 3 banks, DBS will have more room to fall compare to the other 2.

And so, the 3 banks are at fair value , however DBS will be more volatile with more rooms to fall during a correction. The above reason and a higher PB ratio had been holding me back to buy DBS. I decided to nibble today after another good result and an increase of dividend. Finger crossed CONVID-19 virus may bring it down to 0.8x PB?

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Portfolio 2019

I find that writing a year end result isn't so important, should take the time to research or rest instead, let the result show in 5 to 10 years.  It has been 4+ years since I started the investing journey. So let's do a quick one.


Value/Growth/Income Portfolio (SG/HK/US)

2015 - Started investing after my first book, first stock is keppel so yeah GG
2016 - Read more books. End of SCB no minimum fee. Started invest on REITs as well as in 17/18
2019 - Venture outside SGX and non Reits counters. Suffered 3 major losses but is worth the school fees to Mr Market. I am still at least on par with STI after these losses. Still a Noob being slapped by the wave in the open sea.


Income Portfolio (SG/HK)

2018 - Bad call on Duty Free International.
2019 - Bought at market bottom in DEC 2018. The buy out of Ascendas Hospitality Trust and Accordia Golf Trust now in pending. Luck for the bottom picking and the 2 buyout which are both heavy in the portfolio

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Accordia Golf Trust Got An Offer Price

Accordia Golf(AG) offered Accordia Golf Trust (AGT) JPY$63,167 Million (S$780 Million) for all interest of its golf courses, including debts.  This amount to 71 cents per share. Initially, myself and the online committees were expecting a delist of 80 cents to a high to 120 cents or more and this feel like a low ball offer. However, the offer is regard to the golf courses and not an offer to buyout the whole trust. We got our hands in a situation of Saizen Reit. I need to reevaluate.

How much is the valuation of the golf course? 

The golf courses is valued at JPY$141 Billion in the latest quarter statement. Some have pointed out the JPY$63,167 Million offer is not enough. But the actual value is after deducting debt. The liabilities consist of borrowings, leases, membership deposits and differed taxes. These items are operational incurred debt, which I believe will be buy out together with the golf courses. 

Total liabilities are worth JPY$92 Billions*, which make the golf courses worth JPY$49 Billion. So Accordia Golf is paying JPY$14 Billion above valuation for these golf courses. 

*I make some adjustment due to the change in accounting

What is left?

The other assets (cash, receivables, other assets) total JPY$7.8 Billion after deducting intangible assets. This is worth 8.7 Singapore cents per share. 


Am I right?

I am no accountant. I do not know if the 'debt' includes all liabilities for this case. Such is the difficulty of a retail investor.  According to above assumptions.

Actual value = Golf Course + other left over assets
                     = JPY$49 Billion + JPY$7.8 Billion
                    =  70 Singapore Cents

Offer Value  = Offer price for Golf Course + other left over assets
                    = JPY$63.167 Billion + JPY$7.8 Billion
                    =  80 Signgapore Cents

NAV base on latest Quarter = Equity - Intangible/ total shares
                                             = (JPY$66 Billion - JPY$4 Billion) / 1.1 Billion
                                             = 70 Singapore Cents

Hence my assumption of actual value and actual NAV is correct. And the so call low ball offer below NAV is due to the deduction of intangible. 

Conclusion

After sounding my displease, thanks to user @dennischins in Investingnote pointing out offer is only for the golf course. The clarification of AGT released today wasn't clear and has cause much confusion. Or rather we retail investor are not familiar to the terms.

Hence, AG actually paid 25.6% above value for the golf courses or a 14.3% premium above fair value in terms of unit price.  At 80 Singapore cents valuation, I guess I can't complain as it matches my previous expectations.

However do note in the case of Saizen Reit, they distribute the proceeds soon after divestment but delisted 2 years later. Impatient investor will sold after the distribution. 


I may have may a mistake somewhere. Please point out if there is any. 

EGM for Saizen Reit and distribution of proceed

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