Ascott Residence Trust:
Proposed acquisitions in Australia and Japan
- Ascott Residence Trust (ART) announced its proposal to acquire three serviced residences and four rental housing properties in Australia and Japan from its sponsor Ascott Limited for a total purchase consideration of S$246m.
- This translates into an EBITDA yield of 5.1%.
- On a pro forma basis, the acquisitions are expected to raise ART’s FY14 distribution income by S$3.9m and DPU by 2.9%.
- ART intends to fund the acquisitions with a combination of debt financing and the issuance of perpetual securities.
- We are positive on the acquisitions as the transactions are expected to be DPU accretive and would enhance ART’s geographical diversification and penetration into growing markets.
- As these are interested person transactions, ART would need to obtain unitholders’ approval at an EGM. We thus maintain our BUY rating and S$1.44 fair value estimate for now.
(Wong Teck Ching Andy)
CapitaLand Limited:
Recycling capital through divestments to ART
- CapitaLand (CAPL) has proposed to divest its interests in four serviced residences and three rental housing properties in Australia and Japan to Ascott Residence Trust (ART) for a total consideration of S$246.0m. These assets comprise the 380-unit Citadines on Bourke Melbourne, the 160-unit Citadines Shinjuku Tokyo, the 124-unit Citadines Karasuma-Gojo Kyoto and four rental properties in Osaka Japan.
- We understand that CAPL is expected to book a net divestment gain of S$27.7m from the sale.
- In addition, the sale is conditional on ART obtaining approval of its unitholders at an EGM and is expected to be completed by end Jul 2015.
- We like that the group continues to actively recycle capital and the divestment of these mature assets will strengthen its balance sheet and allow proceeds to be reinvested in future projects.
- Maintain BUY with an unchanged fair value estimate of S$4.07.
(Eli Lee)
Ascendas REIT:
Legal proceedings against two of its contractors
- Ascendas REIT (A-REIT) announced that it has started court proceedings in the Supreme Court of Singapore and arbitration proceedings against two of its contractors, A@risco Services Pte Ltd and Concorde Security Pte Ltd, to seek adjudication on the total amounts payable by AREIT to them for services rendered.
- The amounts in dispute with A@risco and Concorde are ~S$3.6m and S$1.8m, respectively.
- A-REIT is also seeking damages of S$460k from A@risco for certain works done.
- As the legal proceedings are not expected to have a material impact on the earnings of A-REIT, we maintain HOLD and S$2.49 fair value estimate on A-REIT.
(Wong Teck Ching Andy)
OSIM International:
Increases stake in TREK 2000
- OSIM International Ltd announced last evening that it has entered into a subscription and purchase agreement with TREK 2000 International Ltd for a strategic investment purpose.
- TREK 2000 was listed on the SGX mainboard since 2000, and engages in the field of Interactive Consumer Solutions and Security Solutions.
- OSIM intends to work with TREK 2000 on the commercial application of its patents and technology for products in the wellness and healthy lifestyle sectors.
- OSIM is an existing shareholder of the company, whereby its stake will increase from 1.14% to 8.75% following a subscription for 24m new ordinary shares and 1m treasury shares at S$0.4365/share. The total consideration is S$10.9m, and this investment amount is not significant in view of OSIM’s net cash position of S$256m as of 31 Mar-15.
- We have a HOLD rating on OSIM with fair value estimate of S$1.87.
- Do note that the share price has corrected recently, down to as low as S$1.62, partially taking into account an expected set of muted 2Q earnings. As such, for the longer term investors, the price correction has also opened up an opportunity to slowly accumulate this stock in anticipation of an improved outlook for the 2H of its financial year.
(Jodie Foo)
Source: http://www.ocbcresearch.com/
