Towards Financial Freedom
DBS Equity Research: Wired Daily 1 July 2015
Suntec REIT - Extracting value from Park Mall. Maintain HOLD, TP reduced to S$1.76
Suntec REITannounced that it has entered into an agreement to divest Park Mall for $411.8m. Based on its current NLA of 267k sqft and FY14 NPI of S$18.9m, this translates into a sale value of S$1,541 psf and NPI yield of 4.6%. Suntec REIT will subsequently take a 30% stake in a JV Co together with Singhaiyi Group Ltd (35%) and Haiyi Holdings Pte Ltd (35%), which is controlled by Mr. Gordon Tang. The JV Co will completely redevelop the property into a commercial development comprising two office towers with an ancillary retail podium, and will apply to extend the lease term to 99 years from 53 years currently. Suntec REIT will contribute S$115m of equity to the JV Co based on its pro rata stake.
Upon completion, Suntec REIT will have the right to acquire one office tower, while Singhaiyi and Haiyi will collectively have the right to acquire the other office tower and the retail podium. Assuming construction cost of S$500 psf, we estimate total development cost including lease extension top up (to 99 years) to be in the range of S$700m (c.S$1,600 psf). We cut our FY16 DPU estimates by c.6%. Maintain HOLD, TP reduced to S$1.76 (Prev S$1.84).
ComfortDelGro's subsidiary has been shortlisted as one of four potential operators for London Overground. London Overground is a suburban rail network and is managed by Transport for London (TfL). The new concession is for 7.5 years from Nov 2016. The tender documents will be issued by end July and bid submission by mid-Oct. At this juncture, it is still too early to factor this development for CD's forecasts given the uncertainty of the tender process and the other contenders. Nonetheless, our back-of-envelope calculation suggests that this could have a c.3% positive impact on CD's net profit in FY17F if it wins. Maintain HOLD, TP: S$3.00.
Since its IPO in 2013, PACC Offshore Services Holdings (POSH) - despite its fleet quality and reputation - has not quite lived up to investors' expectations, with problems in its Mexico JVs, delays in delivery and contracting of its two flagship semisub accommodation vessels (SSAVs) and weaker-than-expected results in some of its other smaller business segments. Thus, we believe it may take a few quarters of better execution and earnings delivery before any sustained re-rating can occur, especially in an environment of weak OSV demand after the fall in oil prices last year. Despite a poor earnings track record, we maintain our HOLD call, TP: S$ 0.50, as earnings are likely to improve from next quarter with the full contribution of the first SSAV charter, which should lend some support to share price.
Mapletree Logistics Trust announced the proposed acquisition of Coles Chilled Distribution Centre (Coles CDC), a premium freehold cold store warehouse located in Eastern Creek, Sydney, New South Wales, Australia, for a purchase consideration of A$253m (approximately S$261.5m). Coles CDC is 100% leased to blue-chip tenant with a long lease term of 19 years and built-in rental increase. Currently the property has an NLA of 55,395 sqm with a potential 7,000 sqm for future expansion. Initial yield of 5.6%, and transaction price is at A$4,567 psm. According to the Manager, acquisition will be funded by debt and DPU is estimated to increase by 1%. Gearing is estimated to increase to 39% post deal. This will bring YTD acquisitions to close to S$300m ( post deals done in Korea and Vietnam from Sponsor), where contributions from acquisitions will help compensate for the loss of earnings due to ongoing headwinds seen in the Singapore portfolio ( vacancy risks due to conversions from multi-tenanted to single tenanted properties).
ST Engineering announced that its aerospace arm, ST Aerospace has signed an agreement for a six-year engine maintenance contract worth approximately US$350m (approximately S$472m) from India's second largest airline Jet Airways and its subsidiary JetLite.
OEL (Holdings) signs sale and purchase agreement to enter the oil & gas business via the acquisition of 51% stake in Allied Resources. Allied Resources indirectly holds 50% interest in Qian An, a joint venture company that is principally engaged in the exploitation, development and production of oil and natural gas from two Oilfields in Jilin, China. The remaining 50% interest in Qian An is held by PetroChina Company Limited. The consideration for the proposed acquisition is approximately S$18.2m, To be satisfied by cash of S$11.9m and by way of issue of new shares at S$0.075 per share, amounting to an aggregate value of S$6.3m.
QT Vascular has entered into a convertible bond subscription agreement with ICH Gemini Asia Growth Fund and three other individual investors for a US$12m convertible bond investment. This funding will strengthen the Group's financial position needed to propel it to the next milestone by allowing the Group to focus more resources on developing its Drug Coated Chocolate® platform further.
United Food Holdings expects to register a significant loss before tax of up to approximately RMB550m for 2QFY2015. The expected significant loss is mainly attributable to a change in the operating environment which was caused by actions taken by the Chinese authorities in China to curb serious industrial pollution.
Sino Construction has entered into a sale-and-purchase agreement to dispose of all its shares in its Malaysian construction subsidiary, Elite Bay. The disposal, which has a total cash consideration of S$100,000, is in line with Sino Construction's new strategy to expand into the energy resources sector. The group intends to use the proceeds from the disposal to fund the development of its micro power plant business.
Source: DBS
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
