Author: tfwee
Suntec – UOBKH
Selling of Shares by Substantial Shareholder
75.1m shares offered by Lee Shau Kee. Substantial shareholder of Suntec REIT and chairman of Henderson Land Development, Lee Shau Kee has sold his entire stake of 5.27% or 75.1m shares of the trust for S$1.995 to S$2.04 each, generating S$153m. The share sale, managed by Citigroup, resulted in a dip in share price of 4.4% to S$1.97 yesterday. We believe that the sharp drop in share price reflects a shake-up of unitholders’ confidence in the stock.
Catalyst diluted by impact of deferred units. Key driver for the stock will come from rental reversions of its Suntec City and Park Mall offices. However, the impact will be diluted by its 207m deferred units issued at IPO, which will start in Jun 08 through six equal semi-annual payments of S$34.5m each. In addition, we do not foresee any significant asset enhancement programs this year as it is scheduled to complete its Suntec City enhancements by this end of this month. We also believe that any contribution from enhancement of Park Mall will
pale in comparison to Suntec City.
Maintain HOLD, fair value S$2.31. Previously, we have initiated the stock with HOLD when the share price was trading at S$2.09. With the more attractive current share price of S$1.97, investors who are more bullish on the stock may want to do a trading buy to take advantage of the share price weakness. However, we believe that the fundamentals remain, and this price weakness may be only short term, consequent to the share sale which has shaken unitholders’ confidence. Therefore, we maintain HOLD on the stock with a fair value of S$2.31.
CDLHTrust – DBSVickers
Call for Capital
New share issue: CDLHT is issuing 130m new shares in two tranches: 1) A non-renounceable preferential offering to Singapore-registered security holders on 3 for 20 basis; and 2) A private placement to institutional and other investors. The issue price is expected to be close to 10% discount to the weighted average price for trades done for the day the placement agreement is signed. The purpose is to repay certain existing debts and for general corporate and working capital. It will also help to lower the gearing ratio, providing the REIT flexibility to make further yield accretive acquisitions.
Maintain Buy, TP S$2.81: We assume the pricing for the new tranches to be at S$2.20 per share, translating to a potential increase in capital of S$286m. This will help to offset the capital for the Novotel Clarke Quay purchases of S$201m and some other outstanding debts. The capital call will also lower their gearing. We remain positive on the stock as current hotel demand outweighs supply plus the upcoming mega projects and events will help sustain visitor arrival growth. We have raised our forecast for Singapore hotel rates to increase at a 18% y-o-y from 2007 to 2012 for RevPAR under their portfolio. Maintain Buy, target price increased to S$2.81 at parity to our DCF calculation based on fully diluted basis. This is the best stock within the property sector with the highest exposure and benefits the most from the tourism sector’s upturn.
CCT – OCBC
CCT’s associate grows. CapitaCommercial Trust’s (CCT) 30% Malaysian associate Quill Capita Trust (QCT) recently announced its intention to acquire 2 properties in Kuala Lumpur for RM215m. This would be QCT’s first acquisition post IPO and is in line with its growth strategy to double its asset size to RM 560m by end 2007. The acquisition is to be equity funded and CCT intends to subscribe to its allocation to maintain its proportionate stake in QCT, and the amount is small at under S$30m. More importantly, with its gearing standing at 32% and an investment portfolio value of about S$3.8bn, its balance sheet is well able to support additional debt of over S$500m.
Divestment gains. One of the assets that QCT is buying is Wisma Technip, which CCT has an interest via its 100% investment in its junior bonds. The acquisition price of RM125m will result in CCT recognizing a divestment gain of RM4.4m (about S$2.0m). As completion is in 4Q07, we will adjust our forecast upon the release of CCT’s 1H07 results expected in late July.
Asset enhancement at Raffles City. Presently, the key development is the asset enhancement works (AEW) at Raffles City. CCT intends to decant space currently used for mechanical and engineering equipment. This will release about 41,000 sq ft of space for retail use. It will be spread over 3 levels and will encompass building a 3-storey island podium. The estimated cost is S$56m and funding will be via debt. As stated previously, we see no issues with respect to debt funding. Construction has started and completion is expected by end 2007. The estimated bottom-line accretion from this AEW is about S$2.7m, or a DPU of 0.20 cent.
Maintain HOLD. In light of the development and the expected rapid growth of QCT, we are including QCT’s market capitalization into CCT’s valuation. Presently, the effect is small at about S$0.04/CCT unit. However, depending on how the REIT sector pans out in Malaysia, QCT’s valuation to CCT could be meaningful in the future. More significantly is the expected asset size growth for CCT, and management has guided on S$5-6.0bn by 2009. We see this as achievable with the positive outlook for the office sector. Our valuation has an asset target size of $5.5bn. Finally with the inclusion of QCT, our fair value estimate is revised up from S$2.58 to S$2.62. We maintain HOLD rating.
AllCo – SGX
RIGHTS ISSUE PRICE AND UNDERWRITING PRICE
Further to the announcements made by Allco REIT on 25 May 2007 and 26 May 2007, the Board of Directors of Allco (Singapore) Limited, as manager of Allco REIT (“Manager”), is pleased to announce that the Rights Issue Price per Rights Unit is S$1.04. Applications for Excess Rights Units by Eligible Unitholders will be made at the Underwriting Price of S$1.14. Any Remaining Rights Units will be underwritten by the Sole Underwriter at the Underwriting Price.
Further details will be set out in the circular (which includes the Offer Information Statement) to be lodged with the MAS and despatched to Unitholders in due course.
Source : SGX