Princess Cove R&F

BigMouse · Apr 1, 2015

Vohkster said:
Lol bro. Why so secretive about local hero name? Hmm. Cash reserves is good but we have to look in totality when comparing apple to apple. I am quite sure RnF who is in the mkt longer than local hero would be able to generate such huge cash reserves. So it may not be the best comparison. Probably looking at other things like gearing ratios liquidity ratios or solvency ratios to make a comparison. It would be fairer to compare companies with similar size. We can't possibly use Apple as a benchmark for technology companies can we?

I disagree with your analogy about comparing to Apple. We are comparing the financial power between real estate companies so what RedsYWNA says is very appropriate. This project in the scheme of things to R&F is but a small percentage of their total project. However for a Malaysia Developer, it can represent a much larger risk exposure despite a smaller development.

In turn, RnF has much smaller reserves when compared to GreenLand which is a much larger company.

Funniman · Apr 1, 2015

BigMouse said:
I disagree with your analogy about comparing to Apple. We are comparing the financial power between real estate companies so what RedsYWNA says is very appropriate. This project in the scheme of things to R&F is but a small percentage of their total project. However for a Malaysia Developer, it can represent a much larger risk exposure despite a smaller development.

In turn, RnF has much smaller reserves when compared to GreenLand which is a much larger company.

For a project like in JB, R & F should not have any problems, at least for the first phase. Other subsequent phases would depend on market sentiments. R & F borrows heavily, if not mistaken is the 2nd or 3rd most highest in China. Cash flows are important but to get a true picture, you need to see the balance sheet if the borrowings are short term or long term. If China increase the bank interest, then the cost of borrowings would increase thereby reducing profits. By the same token, if there's a lot of unsold units or land banks though can be termed as inventory assets, these non moving assets would affect financial performance.
But if I am a buyer, I am not worried about the completion. What I should be worried is if the rentals can cover the bank payments. Then again, I not a buyer, so I just kaypo here only. :smile:

Vohkster · Apr 1, 2015

BigMouse said:
I disagree with your analogy about comparing to Apple. We are comparing the financial power between real estate companies so what RedsYWNA says is very appropriate. This project in the scheme of things to R&F is but a small percentage of their total project. However for a Malaysia Developer, it can represent a much larger risk exposure despite a smaller development.

In turn, RnF has much smaller reserves when compared to GreenLand which is a much larger company.

Lol. You have a valid point. I was trying to put across the fact that if we were to compare companies it would be good and sensible to compare apple to apple. What's the point of comparing BMW to proton? It doesn't make any sense right?

On the same note since malaysia is only a fraction of their total portfolio they could easily jump ship if their bread and butter projects are in trouble back in China. Already in my recent posting trouble is brewing back home n any collapse of a large developer will lead to a contagion n tightening of bank borrowings. It's one thing about having reserves. It's another when u realize the bank refuses to release ur money. It's akin to a bank run. Lehman brothers is the most recent example of a company who had reserves but in the end we all knew what happened. Hence like i mentioned. Reserves is only part of the equation. We have to dwelve deeper into their books to know if a company can indeed withstand external shocks.

snowbird · Apr 2, 2015

R&F is build by a Malaysian registered company R&F development Sdn Bhd and even if anything unduly happen to the parent company, it should not be affected.
Also, the projects here are sell then build and developers collect their dues from the buyers' bankers upon every completion of a certain phase all the way up to final TOP so they are financed all the way.
But then however, the developers needs to sell at least about 80% of their total units in order to break even, otherwise, they will to be in the red and then its bad news!

snowbird · Apr 2, 2015

malpaso said:
the number of listings on iproperty is not that reflective of actual market demand and supply for a project. Many agents post multiple listings and many of them are fake to generate leads. A projects with many listings could mean there are a lot of sellers or landlords , or it could just mean that that project is popular among tenants and investors alike.

Hopefully that's the case but looking at those mentioned buildings its not hard to figure out that many units are unoccupied (tell-tale signs like no curtains, no lights on, empty carpark etc.)

RedsYNWA · Apr 2, 2015

snowbird said:
R&F is build by a Malaysian registered company R&F development Sdn Bhd and even if anything unduly happen to the parent company, it should not be affected.
Also, the projects here are sell then build and developers collect their dues from the buyers' bankers upon every completion of a certain phase all the way up to final TOP so they are financed all the way.
But then however, the developers needs to sell at least about 80% of their total units in order to break even, otherwise, they will to be in the red and then its bad news!

But it's standard practice to incorporate local companies for local projects. Everyone does the same thing, be it Capital Land or Keppel Land in China, or Setia in SG, Australia or London. The financial strength of the Group and its ability to execute should be the major considerations, not whether the S&P is signed with a local or foreign entity (P.S. I would be v surprised if there are any S&P signed with foreign entities).

snowbird · Apr 2, 2015

RedsYNWA said:
But it's standard practice to incorporate local companies for local projects. Everyone does the same thing, be it Capital Land or Keppel Land in China, or Setia in SG, Australia or London. The financial strength of the Group and its ability to execute should be the major considerations, not whether the S&P is signed with a local or foreign entity (P.S. I would be v surprised if there are any S&P signed with foreign entities).

Exactly.
This way, if anything happen to the parent company, the local company is indemnified which also means if the local company goes bust, you can't claim against the parent company.
Also, being a local registered company, it has to abide to the local rules and regulations (eg. they are not allowed to send money to parent company from the local account).

AHGS14 · Apr 2, 2015

snowbird said:
Exactly.
This way, if anything happen to the parent company, the local company is indemnified which also means if the local company goes bust, you can't claim against the parent company.
Also, being a local registered company, it has to abide to the local rules and regulations (eg. they are not allowed to send money to parent company from the local account).

It couldn't also mean that the parent company, not matter how strong their financials are, has no legal obligation to bail out their locally incorporated business entity should it run into problem and face bankruptcy?

RedsYNWA · Apr 2, 2015

AHGS14 said:
It couldn't also mean that the parent company, not matter how strong their financials are, has no legal obligation to bail out their locally incorporated business entity should it run into problem and face bankruptcy?

That's the way it works everywhere in the world. Say if while eating at a KFC Johor restaurant, a customer choked on a bone and died. You can only expect the customer to claim from KFC Johor, and he surely cant be expected to claim all the way up to KFC HQ in the States mah.......

That said, to obtain lower local bank interest, it is not uncommon for the parent to provide a corporate guarantee to the bank for loans taken by the subsidiary. But the bank has the right to pursue the claim, and not the would-be buyers.

On the legal obligation part, in practice, the collapse of a project in Johor would certainly send ripples through to the HQ, esp if company is listed, so the parent can be expected to do a bail-out. I think the bigger issue is overall, which developers are more at risk of a sudden downturn, and not whether the developer is local or overseas.

snowbird · Apr 2, 2015

AHGS14 said:
It couldn't also mean that the parent company, not matter how strong their financials are, has no legal obligation to bail out their locally incorporated business entity should it run into problem and face bankruptcy?

The parent company can provide financial help for reputation sake or perhaps bridging financing during difficult period but not legally obliged to do so.

RedsYNWA · Apr 2, 2015

snowbird said:
The parent company can provide financial help for reputation sake or perhaps bridging financing during difficult period but not legally obliged to do so.

But the same thing applies for local developers too. In practice, the local parent would incorporate individual local companies for each project, say Setia Eco Garden Sdn Bhd, while SP Setia Bhd, the parent, is insulated from claims, should anything happen to Setia Eco Garden Sdn Bhd.

There is also, no legal obligation for the local parent to help the subsidiary.

Funniman · Apr 2, 2015

snowbird said:
The parent company can provide financial help for reputation sake or perhaps bridging financing during difficult period but not legally obliged to do so.

All banks need corporate guarantee from parent company for any loans. No such thing as if subsidiary bankrupt, HQ not affected.

AHGS14 · Apr 2, 2015

Funniman said:
All banks need corporate guarantee from parent company for any loans. No such thing as if subsidiary bankrupt, HQ not affected.

I assume that if the developer borrows, it is only for the purchase of the land. The development/construction costs will be on credit by contractors and paid for by progressive payments collected from buyers. If it runs into a cash flow problem, the bank will sell off the land, and pursue HQ only for the difference between the loan and proceeds from the sale of the land which may have appreciated due to development, even if it is incomplete. The parties that suffer are the contractors(creditors) and buyers. Not sure if I got this right?

Zelphon · Apr 2, 2015

AHGS14 said:
I assume that if the developer borrows, it is only for the purchase of the land. The development/construction costs will be on credit by contractors and paid for by progressive payments collected from buyers. If it runs into a cash flow problem, the bank will sell off the land, and pursue HQ only for the difference between the loan and proceeds from the sale of the land which may have appreciated due to development, even if it is incomplete. The parties that suffer are the contractors(creditors) and buyers. Not sure if I got this right?

So far, what I gathered is that R&F bought the land from Sultan purely by CASH !!!
Then they setup a local subsidiary for the development and also secured bridging loan for the construction..

Funniman · Apr 2, 2015

AHGS14 said:
I assume that if the developer borrows, it is only for the purchase of the land. The development/construction costs will be on credit by contractors and paid for by progressive payments collected from buyers. If it runs into a cash flow problem, the bank will sell off the land, and pursue HQ only for the difference between the loan and proceeds from the sale of the land which may have appreciated due to development, even if it is incomplete. The parties that suffer are the contractors(creditors) and buyers. Not sure if I got this right?

Bro. Sorry to say it is completely wrong. Can't blame you.
Banks do not lend to become a property agent. Banks only want to collect money. That's what they do best. Land are just collaterals as the last resort as too much of legalities and cumbersome. All developers have their own war chest to buy land banks. They do not wait till they find the land, then only ask for bank loans.

Funniman · Apr 2, 2015

Zelphon said:
So far, what I gathered is that R&F bought the land from Sultan purely by CASH !!!
Then they setup a local subsidiary for the development and also secured bridging loan for the construction..

The Sale and Purchase Agreement

Date: 30 November 2013

Parties:
(a) Sultan Ibrahim Johor as the Vendor
(b) R&F Development Sdn. Bhd. (formerly known as Modern Valley Sdn. Bhd.), a wholly-owned subsidiary of the Company, as the Purchaser

The Vendor is the Sultan of Johor, Malaysia, and is independent of and not connected with the Company or any of its connected persons.
Land Purchased: Approximately 116 acres of land in Johor Bahru, State of Johor,Malaysia comprising 4 plots of vacant freehold land and 2 plots of
reclaimed freehold land.

Consideration:
The Consideration is RM4.50 billion (equivalent to approximately HK$10.81 billion or RMB8.50 billion), and will be payable by the Purchaser, subject to certain conditions, in four installments to be paid over a period of three years from the date of the Sale and Purchase Agreement. The Purchaser has already paid a deposit of RM100 million (equivalent to approximately HK$240 million or RMB189 million), which will be deducted from the first installment payment of the Consideration.

http://www.rfchina.com/201312281040727.pdf

AHGS14 · Apr 2, 2015

Funniman said:
Bro. Sorry to say it is completely wrong. Can't blame you.
Banks do not lend to become a property agent. Banks only want to collect money. That's what they do best. Land are just collaterals as the last resort as too much of legalities and cumbersome. All developers have their own war chest to buy land banks. They do not wait till they find the land, then only ask for bank loans.

I have heard of cases in the past where developer A went belly up; the Bank took possession and resold the whole development to another developer B. Buyers from developer A were asked to sign a new SPA with developer B or risked losing their previously bought house and yet still owing the bank money for loan taken to make progressive payments to developer A.

FHBH12 · Apr 2, 2015

A few residential and LTA contractors have gone bust in Singapore these 1-2 years.

Funniman · Apr 2, 2015

AHGS14 said:
I have heard of cases in the past where developer A went belly up; the Bank took possession and resold the whole development to another developer B. Buyers from developer A were asked to sign a new SPA with developer B or risked losing their previously bought house and yet still owing the bank money for loan taken to make progressive payments to developer A.

Chinese developers are big time players. Not easy to go belly up on a single project.
But as Ho Chin Soon always reminded us to buy from well known established developers. They have bigger war chests.

AHGS14 · Apr 2, 2015

Funniman said:
Chinese developers are big time players. Not easy to go belly up on a single project.
But as Ho Chin Soon always reminded us to buy from well known established developers. They have bigger war chests.

I guess you are right.

Princess Cove R&F

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