Thursday, March 13, 2014

OCBC Report 14 Nar 14

KEY IDEA

First REIT: First acquisition of the year

First REIT (FREIT) has entered into a conditional sale and purchase agreement with an unrelated party for the acquisition of Siloam Hospitals Purwakarta (SHPW), which is located in West Java, Indonesia. The purchase consideration is S$31.0m, and represents a discount of 17.3% to the average of two independent valuations obtained. FREIT will finance this acquisition mainly with debt (S$26.5m), with the remaining S$4.5m to be funded by the issuance of new units. In terms of lease structure, it is broadly similar to the two assets purchased in May last year, and offers stability and visibility to unitholders (15+15 years lease tenure with downside base rental protection although upside is capped at 2%). Factoring this acquisition in our model, we raise our fair value estimate on FREIT marginally from S$1.19 to S$1.21. Maintain BUY. (Wong Teck Ching Andy)


MORE REPORTS


Olam International: Cash offer of S$2.23

Olam International Limited (Olam) announced that Breedens Investments Pte. Ltd. (BI), an indirect wholly-owned subsidiary of Temasek Holdings, intends to make a voluntary conditional cash offer of S$2.23 per share for the group. This values Olam at S$5.57b. BI currently owns 15% of Olam (Temasek owns 24.6% of Olam in total). The offer price represents a 11.8% and 26.7% premium to Olam’s last traded price prior to its trading halt and our previous S$1.76 fair value estimate. BI leads a consortium which includes Aranda Investments, Olam founding family shareholders and ten members of Olam’s executive committee, which collectively own a combined majority stake of 52.5% in Olam. BI views itself as a long-term shareholder of Olam and continues to believe in the prospects of the Olam. Its present intention is to maintain the listing status of Olam. Kewalram Singapore Limited, a controlling shareholder of Olam, and certain members of Olam’s executive committee, have given irrevocable undertakings to accept the offer for part of their existing shareholdings in Olam, representing a 5.6% stake. Minority shareholders can choose to tender all, part, or none of their shares for this offer. Note that the Olam’s share price has appreciated sharply from this year’s low of S$1.42 (on 27 Jan 2014) to a recent high of S$2.00, or up a staggering 41% over a period of slightly more than two months. The share price is likely to open today to hit close to the offer price of S$2.23, and ahead of our fair value estimate of S$1.76. For shareholders who have already enjoyed strong gains or are medium-term shareholders, they can consider taking up the offer. (Research Team)

Global Premium Hotels: Koh Wee Meng makes offer at S$0.33

Last night, Mr. Koh Wee Meng made a voluntary unconditional cash offer for all the issued ordinary shares in the capital of Global Premium Hotels Limited (GPHL), other than those shares owned, controlled or agreed to be acquired by the offeror and his concert parties. The offer, at an offer price of S$0.33, is unconditional in all respects. Mr Koh intends to maintain the listing status of GPHL. Fragrance Group Limited (FGL), which currently holds 550m GPHL Shares, has also announced a proposed dividend in specie of these shares to the shareholders of FGL (including the offeror) on a pro rata basis of 0.08 GPHL share for each FGL share held. The proposed distribution is expected to be effected after the close of the offer. The offeror’s aggregate interest in GPHL amounts to 621.5m shares, representing approximately 59.08% of the issued share capital of GPHL (6.80% is direct interest and 52.28% is from his interest in FGL). We advise shareholders ACCEPT THE OFFER. The offer is at our FV on GPHL of S$0.33. While we note that for 4Q13, revaluation gain of land and hotel buildings of S$259.5m helped to boost NAV to 64.0 S cents as of end-Dec from 39.6 S cents as of end-Sep, GPHL has been trading at an average price of around S$0.26 over the past year and the offer price reflects a reasonable premium over this average price. (Sarah Ong)

Hutchison Port Holdings Trust: Sale of 60% of ACT

HPHT has established a JV with a subsidiary of COSCO Pacific Limited and a subsidiary of China Shipping (Group) Company respectively through their investments of 40% and 20% in HPHT’s wholly-owned subsidiary Asia Container Terminal Holdings Limited (ACT Holdings), and their acquisitions of corresponding portions of existing loans for an aggregate consideration of HK$2.472b (~S$403m). HPHT management intends to use the HK$2.472b in net proceeds for working capital and to fund future operations and capex as and when they arise. The disposal yields a gain of around HK$125m (~S$20m) for HPHT. The JV alliance also means that the two berths located at the COSCO-HIT Terminals (50% owned by HPHT) and the two berths at Asia Container Terminals can be operated as one contiguous 1,380m long berth. Management believes that efficiency can be bolstered. Note that the NAV of the assets disposed constitute only 1.8% of NAV of HPHT as at 31 Dec 2013. We maintain a FV of US$0.63 and HOLD rating on HPHT. (Sarah Ong)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks ended Thu with the worst declines in more than five weeks, with the S&P 500 closing below a key technical level and turning negative year-to-date.

- China's economy will face major challenges this year and may see more debt defaults, Premier Li Keqiang said during the conference of the National People's Congress in Beijing.


- Singapore is set to be among the first in the world to regulate operators of bitcoin and other virtual currencies.


- The Ascott, CapitaLand's wholly-owned serviced residence unit, has secured management contracts for its first property in Yangon, Myanmar, and its third property in Wuhan, China.


- Otto Marine has secured a US$24.9m contract for three offshore support vessels to be deployed in Mexico and West Africa.


- Parkway Life REIT is acquiring two nursing homes and an extended-stay lodging facility for the elderly in Osaka city for a combined three billion yen (S$37m).

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