AllCo – DBS

Growing from within

Story: Allco reported a good set of FY07 results that are slightly above our expectations, gross revenues increased 115.7% yoy to S$75.2m. Net property income gained 113.6% yoy to S$61.4. DPU was 6.73 cts, +46.9% yoy.

Point: The results are mainly due to positive rental reversions from its assets in FY07 and contributions from its new acquisitions. Of the total increase in gross revenues, 59% was organic in nature. Moving forward, we expect growth to be more organic as Allco look to benefit from the buoyant demand for office in Singapore with 31% and 15.3% of its NLA expiring in FY08 and FY09. In addition, we expect contributions in FY08 from its withdrawal of 17.2% stake(8.2m units) in AWPF at A$1.1012 per unit, compared to A$1.0 p.u. at initial investment.

Relevance: Currently trading at more than 100% below its NTA of S$1.49 and at 10% dividend FY08 dividend yield, we continue to like Allco and maintain our BUY recommendation at a target price of S$1.56 based on DCF. (previously S$1.65)