ALLCO – DBS

ALLCO, DBS remains a BUY with target price $1.65

– 3Q07 topline grew 66%y-o-y to S$18.9m. This is attributable to the higher revenues from Central Park, 23% increase y-o-y to S$7.8m and maiden contributions from its acquisitions from the three Japanese properties, 55 Market Street in Singapore and Centrelink in Australia. Distribution income per unit in 3Q07 is 1.59 cents, a 4% increase y-o-y. There is no distribution declared in 3Q07.

– Gearing after Keypoint stands at 47%. Following the completion of Keypoint acquisition, Allco’s gearing will increase from 33% to approximately 47%, a level that potentially inhibits further acquisitions in the near term and Allco may seek funding from the equity markets for future acquisitions.

– Positive rental reversions. The demand for Singapore’s office and retail space within CBD continues to outstrip supply over the near future. Allco is poised to benefit from this demand squeeze.

– Attractive yield play. Allco continues to enjoy exposure to the booming Singapore property sector (54.1%), Australia (32.8%) and Japan (13.1%). At current price, Allco offers investors an attractive 6.3% yield with potential upside when rental reversions kick in (54% and 30%) over FY08 – FY09.

– Maintain BUY with TP S$1.65. We continue to like Allco and maintain our BUY call with TP S$1.65 based on DCF valuation. Compared to other S-REITS, Allco is currently trading at a 25% discount to NAV of S$1.36.

October 31, 2007 AllCo, FCOT No Comments »

Leave a Reply