Month: July 2008
CMT – CIMB
Not time yet
• First and largest S-REIT. Listed on the Singapore Exchange in 2002, CMT is the largest REIT in Singapore, and the only REIT to be tracked by the STI. CMT has 13 retail assets under management with a value of S$5.8bn as at Mar 08.
• Balanced portfolio of suburban and prime retail assets. CMT’s portfolio of retail properties are spread across Singapore, balanced between suburban and prime assets and located close to major transportation nodes, with ready population catchments.
• Market leader in retail management. CMT is the market leader in retail management from its continuous asset-enhancement efforts and reconfiguration of malls since listing.
• Asset enhancements and acquisitions to drive growth. CMT is poised for growth via asset enhancements and acquisitions, supported by its parent CapitaLand. We expect CMT to acquire S$2.9bn of properties over 2008-11.
• Initiate with Neutral and DDM-derived target price of S$3.64. We have a target price of S$3.64, using DDM valuation (discount rate 9.7%, terminal growth rate 5%). This offers a total prospective return of 23.8% from potential price upside of 19.3% and a forward yield of 4.5%. We like CMT for its strong management, quality portfolio and high credit rating. However, the relatively pricey acquisition of Atrium@Orchard, with its moderate rental reversions from a
high base, could weigh on its share price in the near term.
Allco – BT
SINGAPORE – Singapore conglomerate Fraser and Neave (F&N) said on Tuesday its property unit has bought 17.7 per cent of Allco Commercial Reit and all of the real estate investment trust’s manager for $180 million (US$132 million).
Fraser Centrepoint plans to rename Allco, which is a unit of troubled Australian asset manager Allco Finance Group, to Fraser Commercial Trust following the acquisition.
At 0152 GMT, shares of Allco Reit climbed 7.8 per cent to a six-day high of $0.77 with almost two million shares changing hands, while its parent Allco jumped 11.6 per cent in Australia.
F&N shares were up 0.2 per cent.
‘Fraser Centrepoint…will be able to assist Allco Reit in negotiating the refinancing of its existing loans, which will bring clear benefits to Allco Reit’s unitholders,’ Fraser Centrepoint chief executive Lim Ee Seng said in a statement.
Singapore’s real estate investment trusts are expected to go through a round of mergers and acquisitions this year as weaker players find it increasingly tough to raise funds and refinance loans.
Fraser Centrepoint said it plans to grow Allco Reit by injecting a pipeline of its commercial property worth $700 million, which was initially identified for its own Reit.
The company has a listed Reit for its retail properties, Frasers Centrepoint Trust, and said it intends to list a third Reit comprising serviced residences in two to three years, depending on market conditions. — REUTERS
AllCo – DBS
The change of the Tide…. F&N Buys into Allco
Story: Allco REIT and F&N separately have announced that Allco Finance Group Limited (AFGL) and two of its indirect wholly-owned subsidiaries, Allco Singapore Holdings Limited (ASHL) and Allco Singapore Investments Pte. Ltd. (ASIPL) have entered into a S&P Agreement with Frasers Centrepoint Limited (FCL) for the sale of:
i) Allco Finance’s Group 17.7% interest in Allco REIT (125.6m shares at the consideration of $0.83), amounting to S$104.3m; and,
ii) the issued ordinary and preference shares in Allco Singapore ( S$75m), the REIT manager of Allco REIT.
Completion of sale on 6th August ’08
The sale is expected to be completed on 6th Aug 08 and is subject to the following conditions being fulfilled:
(a) the Monetary Authority of Singapore not raising an objection to FCL acquiring Allco Singapore;
(b) receipt of Australian Foreign Investment Review Board’s approval for (or no-objection to) the Sale;
(c) waiver of certain covenants under Allco REIT’s financial indebtedness to Commonwealth Bank of Australia;
(d) no breach of certain representations, warranties and undertakings given by Allco Group under the Agreement; and
(e) no occurrence of certain events which have a material adverse effect on Allco REIT or Allco Singapore and their respective subsidiaries.
(From announcement)
Income support arrangements with API ceased
The liability of Allco Finance Group Limited to make payments under the Income support arrangements for the Central Park Asset, Perth will terminate and be restricted to what can be recovered in the administration of Allco Principals Investments Pty Limited (Receiver and Manager appointed), which is in the range of A$1m.
Overall, we think the deal looks to be a win-win situation for both parties. We highlight our views from both Allco REIT and F&N’s perspective in the 2 segments separately.
We maintain our Buy recommendation at TP S$1.23,representing 73% upside.
A) Allco REIT
Point: Deal Neutral to Slightly Positive In terms of valuation, the price of $0.83 per unit that FCL is getting Allco REIT translates to a c. 40% discount to its current book NAV (adjusted for write down in property values of Centrelink in Canberra and Cosmo Plaza in Osaka) at about S$1.40; and, ii) a 17% premiun to the last closing price of $0.71 as at 07/07/08.
From Allco shareholders’ point of view, this announcement is neutral to slightly positive given that:
i) this transaction provides visibility to the strategic direction of the REIT post sale by removing the uncertainty of the REIT’s positioning within the Allco Group in view of the latter’s restructuring activities. The deal also provides backing by a globally recognised conglomerate;
ii) prospect of further acquisition growth given that F&N has a ready pipeline of assets worth c$700m that could be injected into the REIT as well as the possibility of leveraging on FCL’s existing business networks and established relationships in the Asia Pacific region;
iii) The REIT manager is bought out, the poison pill of cS$20m payable is not effected.
iv) However, with FCL’s pipelined assets, the REIT will have exposure to different market segments such as office and high-tech business parks space. Hence, any valuation premium that it could enjoy as a “pure play” REIT could be capped.
Relevance: No change to our TP and recommendation. The REIT is currently trading at an attractive c.9.0% FY08-FY09 DPU yield and at 0.6x P/BV. We remain optimistic on the opportunities available for the REIT post the sale with the entry of a globally recognised conglomerate. .
AllCo – Kim Eng
Fraser Centrepoint Limited acquires 17.7% stake in Allco REIT and 100% in Allco REIT’s manager
Key points:
F&N’s property arm, Fraser Centrepoint, is buying: 1) a 17.7% stake in Allco Commercial REIT; 2) 100% of Allco REIT’s manager from Allco Finance Group, for an aggregate purchase price of S$180m.
F&N intends to use Allco REIT as its vehicle for holding its commercial properties. With this latest deal, F&N is scrapping its plans for a commercial REIT, annouunced earlier on 26 Jun 08.
The three properties initially meant for the REIT (Alexandra Point, Alexandra Technopark and Valley Point) will form the pipeline for Allco REIT.
Key info on Allco REIT:
S$2,045m in assets, S$917m in borrowings, 709.6m units o/s and NAV of S$1.44. Allco REIT’s property portfolio includes nine properties in Singapore, Australia and Japan. Its Singapore-based assets include a 100% in the flagship China Square Central, 55 Market Street and Key Point in Beach Road.
F&N is paying S$104m for the 17.7% stake in Allco, which translates to a unit price of S$0.83, a 17% premium over closing price of S$0.71, and a 42% discount to Allco’s latest NAV of S$1.44.
Comments
At one stroke, F&N acquires a ready vehicle for its commercial REIT without having to go through a lengthy listing process and also saves on listing expenses. It also provides Allco REIT an avenue for growth via F&N’s property pipeline.
Despite paying a premium to last done price, F&N is acquiring the stake at an attractive 42% discount to NAV.
We believe F&N will seek to consolidate its interest in Allco further and this will in turn underpins Allco REIT’s stock price.
This latest deal effectively provides a new support level for Allco’s stock price and is in line with the market view that the smaller and highly-geared REITs are potentially acquisition targets as they faced tighter access to funding amidst a credit crunch .
Other potential targets that may be in play: Cambridge Industrial REIT, MacCook REIT.