Sunday, December 24, 2006

Chinese Brothers

One of our picks earlier this year, Brothers Holdings Ltd. (SIN:G03), has rocketed to a 52 week high of S$0.365 after it announced a project to develop a township in Shenyang City. You may be having a second take but Brothers Holdings is actually the new name for G&W Group which was featured on 16 Feb 06. The name change took place in the middle of this year. From its Friday's close [S$0.295], it is up about 64% since Margin of Safety's post [close of S$0.18] in February. Then, we were of the view that the company "appears to offer a margin of safety of about 50%".

The township project, named Singapore City @ Shenyang will comprise of commercial (10%) and residential (90%) units. This S$1 billion township will also include schools and a country club. It will be located ten kilometres from Shenyang Inernational Airport and about five kilometres from Taiyuan Street Business Zone.

Development will commence in 2007 but is expected to take eight years. In order to fund this huge undertaking, Brothers has completed a private placement of nearly 25 million shares at about S$0.28. The proceeds will largely be channeled to this Shenyang project while the rest will be used as working capital. The placement is fairly substantial as it represents 20% of the existing issued share capital and 16% of the enlarged issued share capital.



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