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Investors’ Corner (AusGroup, CapitaLand, Tiger Airways Hldgs, Viva Industrial Trust)
Investors' Corner | 19 December 2013
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By: Shane Goh
Articles (99) Profile

Price – $0.18
Target – $0.18
While AusGroup has sufficient cash to meet its present needs, due to a recent sale of its Singapore property in Jul-13, the A$21m gross loss in 1Q14 is a strong indicator of high ongoing cash burn. As such, we continue to see heightened insolvency risk compared with its healthier operating peers. If AusGroup continues to operate at a loss, the A$27m in goodwill and intangible assets may be impaired and a charge may have to be taken, further eroding its A$158m book value. AusGroup’s A$219m of orders on hand are insufficient to meet our FY14 revenue forecast. We have also assumed a return to gross profits through the rest of FY14F, as well as a 10% cut in overheads. As these represent a fairly optimistic view, there is potential downside risk to our estimates. We understand AusGroup is exploring options to raise cash for working capital purposes and a share placement is a likely choice, which would dilute existing shares. We upgrade AusGroup to NEUTRAL after the recent sharp fall. – DMG & Partners (18 Dec)

Price – $2.95
Target – $3.88
With a well-diversified business, we believe CapitaLand has the necessary competencies to achieve its return on equity (ROE) target of 8% to 12%. In particular, we view its China exposure favourably and see it as an important growth market for CapitaLand. CapitaLand will apportion 65% to 75% of its long-term capital for shopping malls, serviced residences and offices, half of which will be for mixed developments. The balance will be directed towards residential projects. In order to achieve its ROE target, goals within the next 2 years include the sale of 1,700 residential units in Singapore, the completion of 4,100 homes in China, the opening of malls in China and India, the opening of 25 to 30 serviced residence properties worldwide and the divestment of non-core assets. CapitaLand believes its optimal asset composition comprises two-thirds of operating assets and the remainder in projects under development. Maintain BUY. – Maybank Kim Eng (17 Dec)

Tiger Airways Holdings
Price – $0.52
Target – $0.58
Tiger Airways Holdings made entry into the North Asian market via a NT$2b ($85m) joint venture (JV) agreement with China Airlines. Tigerair Taiwan plans to operate out of Taipei and fly to China, Japan, Korea and Southeast Asia. Tigerair will have a 10% stake as it opts for an asset-light strategy in expanding its footprint. Tigerair could raise its stake upon further discussion but foreign ownership will be limited to 49%. Tigerair will be able to receive marketing fees, brand licensing fees as well as lease income for leasing some of its aircrafts to the JV. The JV will commence operations in late-2014 and will have a fleet of over 12 aircraft over a 2 to 3 year period. The move by Tigerair shows a change in focus as it will no longer depend on its Philippines and Indonesian JVs to drive growth. The risk profile has also somewhat declined as Tigerair will be able to lease or sell some of its aircraft to the Taiwanese JV. We now value Tigerair at 1.2 times FY14′s book value. Upgrade to HOLD. – UOB Kay Hian (17 Dec)

Viva Industrial Trust
Price – $0.77
Target – $0.87
Viva Industrial Trust (VIT) has an initial portfolio of 3 properties in Singapore valued at $743m, with business parks comprising 77.6% of its total asset value, with a low aggregate occupancy at 60% to 64% currently, as they are either in newly completed or in a transition phase from being passively managed to actively managed. This gives scope for VIT to lease up the portfolio and raise operational net property income (NPI). The master leases/rental support in place ensures a flow-through to VIT and unitholders, suggesting mid-term stability in NPIs. China-based Summit Group, Ho Lee Group and United Engineers have also granted right of first refusals to VIT on industrial assets in Singapore and logistics facilities in Korea, potentially adding over 2.3m square feet of gross floor area to its initial portfolio. We believe the key risk to VIT’s distribution per unit is its large exposure to UE Bizhub East as well as an inability to renew the lease at Technopark@Chai Chee, which expires in around 18 years. Initiate ADD. – CIMB Securities (17 Dec)

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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AusGroup  0.027 -- --   
Business: Co mainly provides subcontract services to the oilfield equipment manufacturing co in South East Asia. [FY16 Turnover] Projects (62.2%), maintenance Services (28.5%), fabrication & manufacturing (5.5%), port & marine Services (3.8%).

Insight: Nov-17, 1Q18 revenue increased by 53.6% due to the... Read More
CapitaLand  3.630 +0.03 +0.83%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More

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