Yesterday I came across a report on Tai Cheung Holdings from local broking house Tai Fook and was interested enough to do some further research.
Tai Cheung Holdings is a small cap property investor and developer. Assets comprise a mix of industrial and retail properties, a 35% interest in the Sheraton Kowloon and some luxury residential development projects. There are no unrelated side businesses or past history of departing from the core real estate investment and development business. The company's track record for the last several years has been steady. As far as I can tell from reading the last annual report, the balance sheet is clean - the company has a small amount of debt and capital commitments associated with development projects but net cash. The cash position is likely to improve dramatically in the near future as luxury residential development projects reach completion.
The shares are trading at around $4.50 which represents a discount to the net asset value showing in the accounts. Tai Fook has estimated the net asset value based on current market values at above HK$12 per share - which means that the shares are trading at a 65% discount to NAV.
While I would expect the value of the assets to be materially higher than book value (given what Hong Kong property prices have done since 2003, they would have to be), I am not in a position to confirm or quibble with Tai Fook's estimates. That said, the shares are clearly trading at a discount to NAV which is substantially higher than I would expect to see even for a small investor/developer. The fact that the company has a history of paying reasonable and rising dividends is also encouraging - the trailing yield is 5.1%.
I purchased some shares this morning, paying an average of $4.48 per share.