Ascott Residence Trust:
Proposed acquisitions in Australia and Japan
- Ascott Residence Trust (ART) announced its proposal to acquire three serviced residences and four rental housing properties in Australia and Japan from its sponsor Ascott Limited for a total purchase consideration of S$246m.
- This translates into an EBITDA yield of 5.1%.
- On a pro forma basis, the acquisitions are expected to raise ART’s FY14 distribution income by S$3.9m and DPU by 2.9%.
- ART intends to fund the acquisitions with a combination of debt financing and the issuance of perpetual securities.
- We are positive on the acquisitions as the transactions are expected to be DPU accretive and would enhance ART’s geographical diversification and penetration into growing markets.
- As these are interested person transactions, ART would need to obtain unitholders’ approval at an EGM. We thus maintain our BUY rating and S$1.44 fair value estimate for now.
(Wong Teck Ching Andy)
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Noble Group Ltd: Made more share buybacks
- Can buy back another 574.2m shares
- CIC will continue to support Noble’s business
- Eyeing CIC’s next move
- Widening discount Concerns of a fourth telco entrant in Singapore has led to the steep fall in M1’s share price in recent months. This in turn has affected KPTT’s share price, due its 19% stake in M1.
- But we believe KPTT 's selldown has been overdone as it is trading at a 7% discount to the market value of its combined stakes in M1 and Keppel DC REIT – implying that the market is ascribing no value to its core logistics and data centre businesses.
- At 10.6x FY16 P/E, we believe the current share price offers value and presents a good entry point.
- We keep our Add call but lower our SOP-based target price to S$1.86 to reflect the lower market value of KPTT’s stakes in M1 and Keppel DC REIT.
- Potential catalysts include capital recycling as KPTT divests its data centre assets to Keppel DC REIT.
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Three acquisitions at one shot
- We are in favour of China Merchants Holdings’ (CMH) intended acquisitions of three toll roads in Guangxi as the acquisitions would
- provide earnings diversification to CMH’s existing toll roads;
- increase the average remaining concession period of CMH’s toll portfolio and
- allow earnings enhancement by CMH via refinancing the debt associated with the acquired toll assets.
- Due to insufficient information, our estimates have yet to incorporate the impact of the acquisitions. Our target price (based on CY15 residual income valuation) is raised to S$1.18 as we rerate CMH and lower our discount rate applied from 9.5% to 9% to reflect the reduced concentration risk and the potential enlarged market cap of CMH.
- We upgrade our call from hold to Add.
Ezra Holdings - Not out of the woods yet; a sale-andleaseback of the Lewek Constellation could be on the cards.
FY15F PE (x): 18.4
FY16F PE (x): 20.3
- Ezra’s cash call has lifted its refinancing risks.
- However, its high gearing of 1.27x amidst the current industry downturn and a high cost structure make the situation challenging. A possible sale & leaseback of the Lewek Constellation would unlock US$200m in equity to bolster internal liquidity.
- On the flipside, the high vessel dayrate will add to cost burden.
- Subsea outlook has deteriorated. We cut FY15/FY16 earnings estimates by 35- 47%.
- Maintain HOLD with cum-rights target price of S$0.31.
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