The potential superstock of the week is GSH Corporation (SGX: BDX). GSH is a property developer in Southeast Asia, with four propertie...

Weekly Superstock Scan 28 May 2018 - 1 June 2018: GSH Corporation (Singapore)

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The potential superstock of the week is GSH Corporation (SGX: BDX).


GSH is a property developer in Southeast Asia, with four properties under development in Kuala Lumpur and Kota Kinabalu, Malaysia. It also owns and operates the Sutera Harbour Resort in Kota Kinabalu, comprising two fivestar hotels, a 104-berth marina and a 27-hole championship golf course. In 2017, the Group completed the redevelopment of its flagship commercial property, GSH Plaza, which it later divested that same year. The Group also has a 30% stake in associated company, Henan Zhongyuan Group, which owns one of the largest food logistics and warehousing hubs in China.

Technical


GSH was trading at a high near $0.59 in the beginning of 2017. Thereafter, it start to trade in a trading range and started to trend down in the beginning of 2018. Since end February, GSH has been trading in a narrow trading range from $0.46 to $0.49. Last week, price broke above the range to close at $0.505. The volume of the week was 2.15 million shares, slightly more than 2 times its average trading volume.

There was no news released last week, but the surge in price probably obtained its momentum from the positive news two weeks ago, where all 100 units of the Coral Bay released in a private preview were sold out.

Fundamentals



Including the most recent quarter, GSH recorded 5 consecutive quarters of year-on-year EPS growth. 

Investment in China's Logistic Industry

In FY2017, GSH completed its S$41.0 million investment for a 30% stake in Henan Zhongyuan Group, which owns one of the largest food logistics and warehousing hubs in China. With more than 1,000 tenants, it houses a one-stop platform for food manufacturers, wholesalers and distributors.
In FY2016, this Hub transacted more than RMB 50 billion worth of trade.

The investment in the industrial assets is held for lease and yielded good returns. In FY2017, the Group recorded a total share of profit of S$17.3 million from HZY, consisting recognition of net negative goodwill of S$11.7 million from the investment and share of operational profit of S$5.6 million.

New Residential Projects

GSH owns 67.5% of Coral Bay, a 460-unit luxury condominium nestled within the gated community of Sutera Harbour Resort, in Kota Kinabalu, Sabah. Two weeks ago, it released 100 units at a private preview event, and they have been over-subscribed. The total value of these units exceeds RM330 million. The successful launch shows the strong demand for the Coral Bay and there is a good chance that there will be continued demand for the remaining 360 units of the project.


This year, GSH is also planning to launch its second luxury residential project in Kuala Lumpur. On 12 February 2018, GSH acquired a 50% stake in a prime land parcel of approximately 1.4 hectares in the heart of Kuala Lumpur’s Chinatown that could potentially be developed into a premium 1,700-unit condominium. Given's GSH good track record at its first residential project in KL - Eaton Residence, GSH does have a good chance of succeeding in this second project.

Insider Buy

The chairman of GSH, Goi Seng Hui (wow I just realised did the chairman tried to name the company after himself while claiming GSH stands for Global Strategic Holdings) owns about half of the company's share. On top of that, he has been buying back shares of GSH frequently this year, with the biggest purchase being a 3.4 million buy at an average price of $0.47. He appears to be very confident on the company moving forward, or will there be plans for a buyout in the future?

Matrices
o Large float of 540 million shares with a average daily trading volume of 230000 shares. The float is more than 2000 times its average trading volume, hence the stock is unlikely to see intraday big moves.
+ GSH is trading at just 11 times its trailing twelve months EPS.

Risk Factors/ Things I do not like:


  • New Malaysian Government - With a new Malaysian government in place with the recent election this month, government policies may have an impact on GSH's projects in Malaysia. The new PM, Dr Mahathir has on several occasions criticised on Chinese investments. This may cause Chinese buyers, one of the main target group for GSH's upscale property, to hold back on their purchase.
  • Low liquidity - The trading volume for GSH is generally quite low. There are a number of days in the past three months when no stocks are traded in the entire trading day. Buying and selling the stock without losing too much to spread may be an issue.


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