Stock Review: Accordia Golf Trust

In my first review, I mainly looked into the financial reports and the motivations of their parent company that is listed in Tokyo. At that time, the share price was S$0.70. Five months later, their share price is hovering around S$0.60. I will attribute this decrease to the overall weakness of the market, and not specific to the company. As such, does a lower price present a buying opportunity?

I decided to look into the more optimistic aspects of the future. Yen appreciation? Economic recovery after 25 years of sluggish growth? Increase interest in golf? I don't want to bet on those factors that are intangible. The only tangible aspect is the location of the golf courses, which I decided to study a little bit more.

Japan is huge. Some people believe that the Tokyo Olympics in 2020 will turn the economy around. As golf is also one of the new sports to be featured in the Tokyo Olympics, there are people who believe that it will generate interest in golf and the golf courses will be profitable.

I will sidetrack a bit to illustrate a fallacy in logical reasoning.

A: People love to watch movies
B: People find DVD rental is a cheap way to watch movies
Therefore, DVD rental shops is a good business to be in.

However, what if there is a new way of watching movies that is as cheap as the cheapest DVD rental?

A: People love to watch movies
C: People find that Google Movies/Netflix is as cheap as DVD rental
D: People find that Google Movies/Netflix is more convenient than DVD rental because they can get it instantly, without having to wait for the DVD to be available, or travel to and fro the shop or wait for the DVD to be delivered.

Therefore, DVD rental shops is not a good business to be in.

Notice how the introduction of new business models can potentially kill off a business model that was successful earlier?

Back to the reasoning for golf. Even if interest increases, more people play golf, does it mean that more people will play golf at golf courses? Are there equivilents of Google Movies/Netflix in golf?

The golf course where the Tokyo Olympics will use had been identified. Check out the wikipedia page -- Kasumigaseki Golf Country Club, which is located in Saitama (埼玉県). For those who are not too familiar with Saitama, it is not that near to Tokyo to experience a tourism/expatriate boom from an Olympics event.

Accordia Golf Trust (Singapore) has a few golf courses in Saitama. The portfolio of golf courses are published on their website. If you read the English version, click on Tokyo region. As most of Google Maps is in Japanese, I referenced the Japanese list to make sure that the words match. There are seven golf courses under Accordia. However, there are many more golf courses in the same area and in fact, nearer to the residential areas and the olympic golf course.

Kasumigaseki Golf Country Club and Tokyo Golf Club are side by side on the map

I show this picture first because on Google Maps, only Tokyo Golf Club is shown when I zoom out.

Map of  golf courses to the east of Tokyo Golf Club

Accordia's golf courses are in red, while the other golf courses big enough to be visible on the map are pink. Take note of the mountain ridges too.

Map of  golf courses to the west of Tokyo Golf Club

Map of  golf courses to the north-west of Tokyo Golf Club. This joins to the top left corner of the "west" map.

My thoughts after going through this map study
There are many many more golf courses than what I had circled in pink. Those that are still visible on the map to be circled are large golf courses. While I was browsing the map, there were many smaller golf courses that are peppered all over the place. Some were called mini-golf clubs.

The Google Movies/Netflix equivilent in golf courses could be these mini-golf clubs that are in the residential and urban areas. Assuming that interests in golf really increases, and people want more than play golf on a Wii console at home, then the next best convenient and cost effective way will be at the mini-golf clubs or golfing stations where you are sheltered from the sun and rain, don't have to pick up golf balls, and still play golf.

There will still be people who want to watch movies at the cinemas or rent movie DVDs from shops, so these businesses, if they manage to survive with good cash flow management, will still be profitable, but you will be kidding yourself if you are expecting year-on-year growth in profits.

If I were to buy a tiny stake in a golf course company, I will opt for a more pessimistic valuation model based on the land, instead of the membership fees or playing fees. I may consider buying a tiny stake in a mini-golf club if there is such a company. For now, I have not convinced myself.

The writer does not own shares in the companies mentioned.