Sunday, January 5, 2014

OCBC Report 6 Jan 14

KEY IDEA

Tiger Airways: Negotiating Tigerair Philippines transaction

Summary:
An online Philippine news portal, InterAkyson, reported last Friday that Cebu Pacific is in talks to acquire Tigerair Philippines (TRP) from Tiger Airways Holdings (TR). The article quoted an executive director of the Civil Aeronautics Board as saying that Cebu Pacific has filed an application to acquire 100% of TRP. TR has confirmed that it is in the midst of negotiating a proposed transaction involving TRP but emphasised that no definitive agreement has been signed yet. TR owns 40% of TRP. For the latest quarter, 2QFY14, losses for TRP widened to S$9.0m despite narrowing losses for the previous three quarters (-S$8.3m in 3QFY13; -S$7.3m in 4QFY13; -S$6.0m in 1QFY14). We believe that a sale of TRP should be a positive for TR, given that TRP operates in a market suffering from overcapacity. Pending additional updates, if any, regarding the possible sale of TRP, we maintain our HOLD rating and fair value rating of S$0.55 (based on 1.1x P/B) on TR. (Sarah Ong)


MORE REPORTS

CapitaMalls Asia: Grants option to divest Westgate Tower


Summary:
CapitaMalls Asia (CMA), together with CapitaLand Ltd and CapitaMall Trust, has granted options to a consortium (Sun Ventures Home Pte Ltd and Low Keng Huat Ltd) to purchase Westgate Tower for S$579.4m. These options expire on 24 Jan 2014. Westgate Tower – the 20-storey office component of the Westgate integrated development – has 305k sq ft of net saleable area (NLA) and is due to be completed in 2H14. Recall that the CapitaLand group had won the tender for the Jurong Gateway site in May ‘11 for S$969m (S$1,012 psf ppr). With an estimated total development cost of S$1.5b for the entire Westgate project, the group had then estimated the capital value of the office component at S$1.1k-1.2k psf NLA, which points to a sizable 60% - 70% profit margin over capital value for this deal. Therefore we are overall positive on this potential divestment and, given CMA effective interest in Westgate at 58.3%, expect significant gains to be recognized if the options are exercised. Maintain BUY with an unchanged fair value estimate of S$2.55. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES


- US stocks Friday closed out a holiday-shortened week mostly lower as outgoing Fed Chairman Ben Bernanke called for continued efforts to cement the economic recovery.


- Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam will deliver the Budget statement for Financial Year 2014 on Feb 21.

- Singapore Exchange buyback activity fell to its lowest level in three years with 69 companies recording 1,068 filings worth S$451m in 2013 - sharply down from 2012 (98 firms, 1,521 filings, S$719m) and 2011 (96 companies, 1,730 filings, S$1.06b).

- AusGroup has proposed a private placement of 96.1m new shares - representing about 19.9% of the total number of its issued shares - to raise net proceeds of about S$15.2m.


- MTQ is banking on a bright outlook for the offshore drilling industry and looking to expand its footprint in the Middle East.

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