Thursday, April 25, 2013

The story behind $SUN and some analysis

Suntrust Home Developers, Inc. (SUN) is run by Andrew Tan, which, as many of you already know, also runs AGI, MEG, ELI, and GERI.

There's a rumor circulating that SUN could be used as a backdoor for Travellers International Group (a joint venture between AGI and Genting Hong Kong, owners of Resorts World Manila and are also set to build the new Resorts World Bayshore).

Does this make any sense? My personal opinion: YES, it does. IPO is expensive, maintaining a listed company is also expensive, so it's a win win if Andrew Tan already owns a listed company that can be converted into a more profitable venture.

Conglomerates are now thinking of merging their property units, it's also possible that AGI is also thinking of merging its own property units MEG, ELI and GERI. Since SUN only has a small portfolio, it may be excluded from the merger.

If you look at SUN's history, however, you'll notice that it has a shady background before it became the SUN we know today. Before SUN changed its name in 2002, it was the controversial BW Resources (Symbol: BW). In 1999, its share price skyrocketed from P2 to P107 (5K% increase) when a rumor spread that Stanly Ho, a bigtime Macau casino operator, was investing in BW to build a Casino in the Philippines.  Stanly Ho even made an appearance in the Philippines which further contributed to an increase in BW's share price.

The deal never went through and BW's share price plunged. According to PSE's investigation, it was stock manipulation through wash sales in which the buyer and the seller are the same to deceive investors that the stock is active and profitable. Allegedly, cronyism played a major role in this scandal. Dante Tan (Major shareholder of BW) and JV Ejercito were business partners and friends.

Today, the motive may be more legitimate, and the deal may more likely push through but who really knows? No one yet. As of writing, AGI is neither confirming nor denying it. Its latest disclosure is vague, stating that Traveller's Group is looking at both debt and equity market for its financing.

However, there's another twist to the story. Remember Stanly Ho? He still owns a chunk of overvalued shares in BW Resources which is now SUN. It is also possible that this is just a way out for him, jacking the price up for profit or just to get his investment back. Again, who knows! Either way, SUN's share price would go up.

CAVEAT! Just a personal opinion, there's no guarantee in this analysis. Agree or disagree? Share it in the comment section below :)

Source 1, Source 2, Photo from archian, Special thanks to my mentor