Suhm, the best way to deconsolidate the balance sheet (in my view) is to take the respective reports & back out the bits the parent company doesn't own. That is to say you need to back out the 54% of the REIT assets/liabilities UOS don't own & the 31.55% of UOADB parts we don't own. You need to be careful to use the same conversion rate they would have used, for example the AU$25m exchange difference that arose in the first half as the Ringgit appreciated against the AU$ will have now been almost completely reversed. The Ringgit started 2014 RM2.92 to AU$1, ended June at RM3.04 to AU$1 and is now back to RM2.95 to AU$1 - the difference is not insubstantial, it would add about AU$25m to the book value attributable to UOS holders.
As to the non-controlling interest, it has varied substantially over time, this is due to the substantial gains that have come from re-valuation & where these assets were held at the time of revaluation. As described above, if there were a major re-valuation to the REIT assets, only 46% of that gain would stick to the ribs of UOS holders, whereas if the gain were in the UOADB entity, we'd get 68.45% of it. This non-controlling interests share has been as low as 10% (in 2002 & 2010) and as high as 47% (2007 - when the REIT had a 30 or 40% upward revision in property values). There are various JV's over the years that make it tricky also.
I still find you can view the business as a pretty coherent whole & over time, nearly 3/4 has come to UOS though I suspect the range will be more in the 65 - 75% range with UOADB operating independently.
As I tried to explain to our friend Pete11, predicting when the revaluation gains will come is actually not that complicated. UOS has stripped out the rental separately since 2003. Since that time, the average cap-rate has been 6.5%. In 2006, when UOS earned AU$13.227m on properties valued at AU$159.921m (for a cap-rate of 8.3%) you knew with some certainty 2007 would contain some revisions, the scale of the AU$94.8m upward revision was the only surprise (off the $159.9m base, it made a 59% uplift in the investment properties value).
Believe it or not, the annualised 7.3% cap-rate registered in the half-yearly just delivered is the second highest since the rent has been shown separately. I was not surprised that there was an upward revaluation in the property values, in fact I named the car-parking assets as the likely source of upward revaluations at a recent investor meeting.
If the properties were brought in line with their historic cap-rate of 6.5%, there could be as much as AU$78.5m in revaluation gains in the second half. Now, our executive tend to be conservative, so don't be surprised if you don't get it all this year, but the properties are not overvalued by any means.
The scale of the slide in sales from a peak of quarterly sales of RM930m in Q1 2013 to an average of about RM350m per quarter for the last few has been bigger than expected, but the trend is still up and some major projects are in the release phase as we speak. Furthermore, unbilled sales have continued to climb steadily and now sit at RM1.6b. Gross profit definitely appears to be sliding too, it's at the lowest levels since 2006.
One last thing holders need to consider is that Desa Eight and the huge Le Yuan residences will be finished in the second half, the last big kick in development profits came with the recognition of profits on completed major projects. Hopefully this will kick GP levels back up to historic levels in the second half.
Pete11, sorry for being so long-winded, I know you don't like to read, but if you can understand the above, you may understand valuation for UOS a little better - Eternalgrowth
UOS Price at posting:
49.5¢ Sentiment: Buy Disclosure: Held
(20min delay)