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DBS Equity Research: Wired Daily 16 Dec 2015

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Publish date: Wed, 16 Dec 2015, 04:38 PM
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CityDev - New investment platform seeding a positive move, lifts NAV by 29cts and EPS by 25cts

Noble Group - Noble Agri stake sale in advanced discussions

City DevelopmentsLimited announced the formation of a 40%-60% JV with Alpha Investment Partners Limited. The investment platform will invest in a portfolio of three prime office properties worth S$1.1bn. The properties - Central Mall office tower, 7&9 Tampines Grande and Manulife Centre will be seeded by CDL. We see multiple benefits for CDL as it will (i) enable the group to tap 3rd party capital to extract shareholder value (ii) enjoy immediate accretion to NAV (+S$0.29, +3%) and FY14F EPS (+S$0.25, +30%). Lastly, it allows the group to better time its exit (5-year option) and potentially realize a fairer value for the portfolio post the current downturn in the office market. Trading at a P/Bk of 0.7x, we see deep value in CDL. We maintain our BUY call and TP of S$10.26 pegged to 20% discount to RNAV.

Noble Groupannounced that it is in advanced discussions with potential purchasers for its 49% stake in Noble Agri and other strategic transactions but no definitive or legally binding documents have yet been signed. Noble currently values its 49% stake in Noble Agri at US$1.345bn. Should Noble raise US$750m, it will be able to significantly reduce its US$5.5bn outstanding debt and lower its net debt from 49.4% to 34.6%. We would be positive on Noble's move to exit its 49% Noble Agri stake to strengthen its balance sheet and help ease the pressure it is facing in the credit markets. However, should Noble sell its stake at a discount to the existing book value of US$1.345bn, its critics will likely use this transaction to support their argument that Noble has been overstating the value of its assets. Maintain HOLD call and TP of S$0.49 for now pending further details on any potential disposal.

Yoma Strategic announced that its wholly-owned subsidiary, Yoma Nominee Limited has established a new 50-50 JV with Mitsubishi Corporation. It will serve as the official distributor of automobiles manufactured by Mitsubishi Motors Corporation.

US stocks rallied lifted by energy shares as oil price rose. The rebound in energy stocks overshadowed a 6$ decline in 3M shares after the company lowered its profit forecast. Tonight is the outcome of the highly anticipated FOMC meeting. The FED is widely expected to start the next rate hike cycle. Consensus expects 2 more rate hikes next year that lifts the FED funds rate to 1% by end 2016. DBS Research sees a faster 4 rate hikes next year that lifts FED funds rate to 1.5% a year from now.

Source: DBS
CityDev (C09)Yoma Strategic (Z59)
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