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Investors’ Corner
Investors' Corner | 22 May 2008
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PRICE – $1.31
TARGET – $1.46

With a well-balanced Singapore residential landbank,which is made up of 55% mass market (ASP < $1,000 per sq ft), Allgreen is probably the closest proxy to the more resilient mass-market segment. Yet it is arguable whether its landed land bank (29%) is considered truly mass-market, as each unit sells for $1.8m, ASP $750-800 per sq ft. We believe that during a downturn this portfolio would not be insulated, as evidenced by the slow sales during the previous downcycle from 2002 to 2005, and over the last few months. On the other hand, its investment properties should provide steady recurrent income and dividend support (4% yield). We are also positive on its recent inroads into China, albeit via minority stakes, although visibility is still low and conviction for significant accretion to RNAV is not high at this point in time. Downgrade to NEUTRAL.
– Credit Suisse (05 May)

PRICE – $3.52
TARGET – $3.47

On April 29, Khazanah acquired a 16.4% stake in Parkway for $531.5m from private equity fund, Symphony Capital. Based on a valuation range determined by various scenarios, Khazanah’s acquisition price does not appear to be unreasonable given its long-term focus, but we remind investors that in the interim three years until the Novena Hospital begins operations, investors will not be able to verify any return assumptions and, as such, any investment decision on Parkway would center primarily on investorsʼ faith in management. We believe the key impact of Khazanah’s acquisition is that investors’ two key concerns — the perceived overpayment for the Novena Hospital site, and a possible share overhang in the event TPG Asia chooses to exit its investment—may be somewhat assuaged by Khazanah’s willingness to pay a premium for Parkway. NEUTRAL.
– Goldman Sachs (05 May)

PRICE – $1.57
TARGET – $1.92

2Q FY08 net property income was $42m, up 21% YoY and in line with our estimate. Aside from the inclusion of One Raffles Quay (ORQ), DPU growth was also driven by positive rent reversions from its office portfolio. Replacement/renewal rentals of $11–14 psf/mth were double that of preceding rents. About 21% of total office leases (excluding ORQ) are up for renewal this year and another 44% in FY09. Portfolio average interest cost was 3.13%, down from above 3.2% a year ago, given Suntec REITʼs recent refinancing activities in a lower interest rate environment. Though credit spreads have risen significantly in the last year, swap costs have also halved from a year ago, resulting in neutral or slightly lower finance costs. Gearing ratio is 32.2%, and 35.7% if we include the deferred payment of 207m units. The repositioning of Park Mall, likely by 2010, should enhance DPU in the longer term. With the acquisition of additional land adjacent to the property, the group will add 65k sqf of commercial space at Park Mall. Maintain OUTPERFORM.
– Macquarie Research (05 May)

PRICE – $6.00
TARGET – $10.40

Keppel Land’s enlarged stake of 44% (vs 43% pre-rights) in KREIT means the market’s previous concern that KREIT could be consolidated in the worst case, and Keppel Land’s capital recycling platform would be ruined as a result, will not materialise, in our view. There is no change to our earnings forecast and minimal change to our RNAV estimates from the conclusion the rights issue: FY08E RNAV from $9.11 to $9.12, FY09E RNAV from $9.43 to $9.45, and FY10E RNAV from $9.71 to $9.72. The stock is currently trading at a 14% discount to its current RNAV of $7.04, compared to its historical average of 12% premium to RNAV. We had previously attributed the discount to the stock overhang as a result of KREIT’s ongoing refinancing. With the saga now coming to an end and its capital recycling platform now intact, we expect the discount to narrow. Maintain OVERWEIGHT.
– Lehman Brothers (06 May)

Suntec REIT  1.880 -- --   
Business: Real Estate Invs Trust. Ppties incl Suntec Office Towers, Suntec City Mall & Park Mall. [FY18 Turnover] Office (46.8%), Retail (34%), Others (Ad space, car park income , convention & exhibits) (19.2%).

Insight: Jan-19, FY18 gross revenue rose 2.6% to $363.5m du... Read More

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