New position: Gallant Venture

We bought 10,000 shares (at $0.27) of Gallant Venture today. Amidst the general rise in the stock market, Gallant Venture stands out as a clear underperformer, with rather depressed valuations. The stock trades at a seep 47% discount to its book value of $0.5125 per share, while that book value is similarly understated as the company's landbank is carried at cost.

The company's massive 18,200 ha landbank in Bintan is carried on the books at about $541 million, which works out to about $0.28 psf. While land sales in Bintan have been rather slow, the selling prices have been in the region of between $6 to $29 psf, representing 22-100 fold increases in realisable value. Obviously, there are costs involved in the development of the land into habitable living space, and Bintan is hardly the most popular or sought-after resort destination. We admit that there are huge risks in our investment - much of the land may never be sold. However, we think that with the stock trading at half of an understated book value, we are getting the landbank cheap and are prepared to wait for potential catalysts for a stock re-rating.