DBS Equity Research: Wired Daily 18 Feb 2015

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Publish date: Wed, 18 Feb 2015, 10:59 AM

NOL - Selling logistics division at premium valuations

CapitaLand - 4Q14 results in line . Maintain BUY, TP S$3.88

NOL finally announced the sale of its logistics business - APL Logistics - for a cash consideration of US$1.2bn to Japanese freight-forwarder Kintetsu World Express (KWE). NOL has been unable to grow its logistics division over the last few years owing to the capital commitments of its liner business, and hence this deal is intended to not only realise value for its own shareholders but also help APL Logistics realise its true potential with the backing of KWE. An outright divestment was preferred over an IPO spin off owing to i) better valuations achieved in the trade sale and ii)the intent to allow management to focus solely on the core liner business to turn it around successfully. The valuation of US$1.2bn seems to be a very good deal for NOL, in our view. Based on the net book value of the logistics division of around U$240m at end-FY14, the gain on divestment is around US$900m, which should be booked sometime in FY15 on completion of the transaction. In terms of future forecasts, we expect fall in revenues by around 20% on annual basis and a 20-25% impact on profits in FY15/16F. For now, we are not changing our numbers unless and until the transaction is completed, pending regulatory and shareholder approvals.

CapitaLand's 4Q14 results in line. Operating net profit up 54%, boosted by one-off sale of Westgate Tower; ROE improves to 7.1%. CapitaLand is growing its Investment Properties portfolio, and focus on expanding fund management platform. While headwinds remain in the key residential markets of China and Singapore, Capitaland will look to deepen its exposure into key emerging markets like Vietnam and Indonesia. Maintain BUY, TP S$3.88 (Prev S$ 3.84).

FY14 core earnings of S$111m for CWT were slightly below expectations due to weaker than expected performance from Commodity Marketing. Final DPS of 4Scts was declared (vs 3.5Scts last year). Factoring in lower earnings for the Commodity Marketing segment, we lower FY15F-16F earnings by 6.8% and 4.8%, respectively. Still, we are projecting 14% EPS CAGR over FY14-16F for CWT. Growth drivers from two new warehouses totalling over 1.3m sf are expected to contribute fully from 2015 onwards. Maintain BUY, with S$2.06 (Prev S$ 2.08) TP.

Frasers Centrepoint Limited (FCL) has awarded main contracts totalling S$774m for the construction of two projects: Frasers Tower in Cecil Street and Northpoint City in Yishun Central. Both projects, to be built on 99-year leasehold sites awarded at state tenders, are slated for completion in 2018.

Moody's Investors Service has changed the outlook of Frasers Centrepoint Trust's (FCT) Baa1 issuer rating to positive from stable. The rating was affirmed. The rating action reflects FCT's enlarged asset portfolio, which remains focused on the resilient suburban retail sector, as well as its strong financial profile that is supported by a long track record of prudent financial management.

Cambridge Industrial Trust (CIT) has entered into a saleand-purchase agreement with Unicable to acquire a property in Jurong for a total of S$19.9m. The appraised value of the property by Jones Lang Lasalle as at Jan 31 this year was S$16.2m.\

TEE Land has signed an Expression of Interest to acquire three plots of land in Batam, Indonesia for a purchase price of S$4.9m. The Group will finance the cost by internal funds and bank borrowings.

US markets edged higher on speculation that the Greek debt impasse is easing. According to Bloomberg, Greece's government may request an extension of its loan agreement for six months, a step that could ease a standoff with creditors over the country's future financing. Discussions aimed at finding common ground between Greece and its creditors ended on Monday without breaking an impasse. With no deal, the government could run out of money by March and be forced to choose between breaking election promises or abandoning the euro.

Source: DBS

Frasers Property (TQ5)ESR-LOGOS REIT (J91U)Amcorp Global (S9B)

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