Tuesday

Inflationist Eyes Property Developer United Overseas Australia (UOS.AX)

Post a Comment September 15, 2009 – 3:00 am |   | Permalink |  Print This Post |

UOS is a founder run Malaysian property developer listed on the Australian Stock Exchange (Yahoo code UOS.AX). Profitable since inception and trading significantly below NTA, this family owned and run business is our kind of business. It builds both commercial and residential properties in Kuala Lumpur and owns a portfolio of commercial and residential properties (which it listed separately on the Singapore Exchange as a REIT).

We have foolishly refrained from buying more UOS in our personal portfolio during the recent decline (we have owned them since it was 57c back in 2001-2002, equivalent to 0.057c post share split), but gave in to temptation this week after its latest financial report confirmed further (significant) increase in its NTA with record profits in the midst of a financial crisis. We bought some for our personal portfolio at 23c. We made a stopover visit to its Malaysian properties last month during our trip to Bali. Its commercial property and development in Bangsar is in prime land. Its focus in developing surrounding Bangsar land and subsequent rezoning as Bangsar South will no doubt add significant value to its investment. Bangsar is a blue chip suburb. It last traded at 24c, ie 400% return in about 7 years. In the lows of March crash, it hit 10c - but like everything else is now at its 52 week high. It is still off its all time high of 36c. We will buy 10000 shares at 20c. It is extremely illiquid, with >95% owned by management. Its recent buyback program has been buying back shares up to 20c. We have been very suspicious of management privatizing the company for years, but so far they have not made a move.

The downside risks are:

• commercial property crash - “experts” have been talking about a commercial property crash being the catalyst of the next crash. This may present us with a better entry point.
• Malaysian economy - we are bearish on the outlook in the long term but any country in Asia will probably do better if China becomes the next economic superpower in the next few decades
• market pull back (we are still holding our breath for markets to pull back)

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On a separate note, we have another order to reshort JBH.AX at $20.