Accordia Golf Trust - CIMB Research 2016-09-08: Osaka golf course visit

ACCORDIA GOLF TRUST ADQU.SI

Accordia Golf Trust - Osaka golf course visit

Visit to 4 of AGT’s golf courses in Osaka revealed that weekend utilisation rates at its courses were high. AGT aims to improve weekday utilisation rates.
Bloomberg consensus puts forward dividend yield at 10.3% and forward P/BV at 0.68x.
Loan-to-valuation ratio of 28.8%. Management targeting accretive acquisitions from sponsor.

Still targeting ¥50bn worth of acquisitions by end-Mar 17.
Dividends are derived in yen and paid in S$. The company does not hedge exchange rate.

We visited 4 of AGT’s golf courses in Osaka recently. Of the 4 we visited, Otsu Country Club was the second-most valuable course in its portfolio while the Izumisano Country Club was the fourth-most valuable.
We also saw the same caddy-less play and automated check-in/check-out systems, which are aimed at reducing operating costs, in Osaka that we first saw in a visit in Sep 15 to the Tokyo courses.

Based on Bloomberg consensus expectations, AGT trades at a forward dividend yield of 10.3% and a forward P/BV of 0.68x.
Dividend payouts are in yen and converted into S$ at the exchange rate on the payment date.
After due consideration, AGT believes that it is better not to hedge the exchange rate exposure at this point in time. Naturally, the strengthening yen provides some translation upside.

AGT’s sponsor is the number one golf course operator in Japan and has a stabilised portfolio of some 26 golf courses available for acquisition. AGT’s target is to acquire ¥50bn worth of golf courses by end-Mar 17.
Its loan-to-valuation (LTV) ratio currently stands at 28.8%. The maximum LTV ratio that AGT can leverage up to is 60.0%. AGT is still in negotiations with its sponsor and the company believes that its ability to conclude some accretive acquisitions could re-rate its share price.

AGT derives all its revenue and expenses in Japan in yen. Its debts are also entirely denominated in yen. About 77% of its debts have been swapped into fixed rates. AGT’s weighted average interest rate is 1.94% per annum.
There are three term loans maturing in Aug 17, Aug 18 and Aug 19, respectively.

Other than the exchange rate translation risk from yen into S$ for dividend distributions, key risks highlighted by AGT include
1. poor weather, which affects revenue,
2. ownership, registration and land-related issues, and
3. lack of organic growth opportunities.

NOT RATED / Target Price: N/A

William TNG CFA CIMB Research | http://research.itradecimb.com/ 2016-09-08

CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998.000 Same 99998.000