PCRT – CIMB

Change in major shareholder

Change of shareholding saw PCRT’s local partner offloading his stake in PCRT. Mr Kuok now holds a 17% stake. New additional earn-out amount negotiated with Summit Group buffers this negative news.We take comfort in greatercertainty of higherdividend yields till 2014.

Without further guidance on target distributions for FY13/14, we leave our estimates unchanged. No change to RNAV or target price (35% discount to RNAV)either.Maintain Outperformon cheap valuations, attractive dividend yields and strong NAV growth.

WhatHappened

Mr Tong Jinquan has pared down his 15% stake in PCRT. Mr Kuok Khoon Hong replaces him as major shareholder with 17% ownership. An additional earn-out agreement has also been negotiated with local partner Shanghai Summit, wholly-owned by Mr Tong, for an amount up to Rmb342m for the period beginning1 July 2013 to 31 December 2014.

What We Think

The local partner’s sale of a 15% stake does not inspire confidence.However, additional earn-outbuffers the negative news. As this is likely to be used to support distributions, we take comfort in the added certainty of higherdividend yields. We estimate that the negotiated amount is sufficient to guarantee 8-8.5% dividend yieldsfor the next two to three years. We previously expected a dip in dividend yield in 2014. A quick chat with management confirms that there have been no changes to existing arrangements as laid out during the IPO. Mr Tong still retains a 50% stake in Longemont assets –interests are still aligned for these projects. The operations on the ground and PCRT’s relationship with Mr Tong remains unaffected.Transfer of shares to Mr Kuok (off-market transactions) was by way of mutual agreement, for Mr Kuok to gain more exposure to PCRT’s assets and PCRT’s for business dealings with Mr Tong to cease classification as “interested-party” transactions.

What You Should Do

Trust PCRT.As construction and acquisition forits portfolio of assets continue as planned, double-digit NAV growth is still expected.Trading at 0.7x P/BV and a 50% discount to our RNAV, valuations are undemanding (CRCT:0.9x P/BV, 7.7% 1Q12 annualised dividend yield).