PHILLIP SECURITIES | OCBC |
Geo Energy Resources Ltd More deals awaited to be settled SINGAPORE | MINING | RESULTS US$182.1mn revenue met 97.8% of our full year expectation of US$186.1mn. US$22.2mn PATMI exceeded our full year expectation of US$19.9mn by 11.6% 1 SG cent first and final dividend declared for FY16 We slightly revise up our FY17e/FY18e PATMI forecasts to US$41mn/US$58mn (Previous: US$39mn/US$56mn). Based on unchanged PER of 11x and USD/SGD 1.3x that stated in our initiation report, we maintain our TP of SG0.45 for FY17. Our TP implies a 60.7% return from the last close price of S$0.28.
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Ascott Residence Trust: Acquisition of prime Orchard asset funded by rights issue
Ascott Residence Trust (ART) has launched a fully underwritten renounceable rights issue to raise gross proceeds of S$442.7m. 481.7m new units will be offered at a rights ratio of 29 rights units for every 100 existing units at an issue price of S$0.919 each. Our FY17 DPU forecast (ex-rights) is currently 6.27 S cents while that for FY18 is 7.44 S cents. Our cost of equity is lowered from 7.7% to 7.5% given the lower gearing as well as the greater proportion of stable income post acquisitions. After factoring in the dilution from the enlarged unit base as well as the time gap between the rights issue and the contributions from the acquisitions, our cum-rights FV (which was derived from our ex-rights FV) drops from S$1.22 to S$1.16. Do note that our S$1.16 FV is cumrights while all the figures in this report are currently exrights. Our FV will drop to S$1.105 when the units go exrights. We maintain HOLD on ART with a fair value of S$1.16. |
CIMB | |
Ascott Residence Trust Buttressing the balance sheet comes at a price ■ ART has launched a fully-underwritten renounceable rights issue at 29 units for every 100 to raise S$442.7m to part fund AOS and two German properties. ■ The acquisition is dilutive and we cut our FY17F-19F DPU by 14-19%. ■ Together with quality assets, the key benefits of the entire transaction, in our view, is to enable ART to strengthen and flex its balance sheet. ■ We downgrade ART from Hold to Reduce. Upside risk to our estimates could be capital recycling which could negate the effects of the negative carry.
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RHB | KGI |
Sheng Siong Irrational Bidding For HDB Sites Has Perhaps Eased What’s New? The latest Housing and Development Board (HDB) commercial sites’ provisional bidding results have been released. While Sheng Siong did not win any the bid for any new sites this month, we note that the small players were not present in that round of bidding. Based on the provisional results, NTUC FairPrice won the bid, with a rental rate of SGD13 per sq ft for the 5,812 sq ft (540 sq m) of space at Bishan. Our View Irrational bidding from small players has perhaps eased. In our 7 Feb report, Sheng Siong : A Defensive Play In Consumer Staples, we highlighted that the competition for rental space posed by small supermarket and minimart chain operators is unsustainable. The small players started bidding for HDB commercial spaces aggressively in 4Q16. Those who won the bids with exorbitant rental rates (close to SGD20 per sq ft) in 4Q16 would probably have commenced operations by now. As such, we believe that the latest provisional bidding results could mean that these players may have begun to feel the pinch.
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Baker Technology Ltd On the acquisition trail? Baker Technology (BakerTech) announced a dismal set of FY16 results as it tipped into a net loss of S$8.3m from a profit of S$9.2m in the prior year. Looking past the weak earnings uncovers an undervalued company, in our view. We believe markets may be penalising BakerTech’s share price given the lack of short‐mid term catalysts previously. That may be about to change if we are to look closer at its latest results announcement. Worth at least 95 SG cents in our view. BakerTech could trade up to 0.9x historical P/B (5 year P/B average), or 95 SG cents, if we assume that it will be able to make an earnings‐accretive acquisition over the next few quarters. In BakerTech’s latest results announcement, we noted an additional comment where it stated that its balance sheet is capable of supporting acquisition and that it is currently pursuing opportunities for a diversified revenue stream. This was lacking in its previous announcements and may indicate a short‐term acquisition that may catalyst the share price. |
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