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Investors’ Corner (Cordlife Group,OUE Hospitality Trust, Soilbuild Business Space REIT, Perennial China Retail Trust)
Investors' Corner | 20 March 2014
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By: Nicholas Tan
Articles (71) Profile

Cordlife Group
Price – $1.18
Target – $1.43

Cordlife has expanded its reach from just 2 markets previously to include Philippines, India, Indonesia, Malaysia and Thailand. It has also deepened its reach into China via an alliance with US-listed China Cord Blood Corporation and CordLabs Asia to provide cord tissue storage services that will give it a steady stream of royalty income. Notably, Cordlife will receive 7% of cord tissue storage revenue as royalty but need not shell out any capital as it contributes knowledge to the alliance. Cordlife plans to extend its product range by launching new and existing products as part of its move to transform itself from just a cord blood bank into a multi-product healthcare products distributor targeting the mother and child segment. A key catalyst is the China royalty income, and upon more material developments, this could raise our forecasts and bring the target price to $1.60. Maintain BUY. – Maybank Kim Eng (17 Mar)

OUE Hospitality Trust
Price – $0.84
Target – $0.82

FY13 results for OUE Hospitality Trust were in line with ours and the street’s expectations. From its listing date of 25 Jul-13 to 31 Dec-13, gross revenue was 1.3% higher than management’s initial public offer forecast due to better-than-expected performance recorded by Mandarin Orchard Singapore hotel. DPU was 2.1% higher than forecast at $0.029. The period saw 26 guest rooms added, while the 32 refurbished rooms achieved about 15% higher room rates. 430 guest rooms are scheduled for refurbishment in phases in 2014 and 2015. Its Mandarin Gallery is 100% committed with more than 90% of the leases having step-up structures with a weighted annual step-up of about 4.7%. Nonetheless, the hotel will see increased competition from 2Q14 with the opening of 3 hotels in the vicinity. Maintain HOLD. – OCBC Investment (17 Mar)

Soilbuild Business Space REIT
Price – $0.765
Target – $0.90

Soilbuild REIT agreed to acquire 39 Senoko Way for $18.3m. The property consists of an existing 4-storey industrial building and a proposed extension, a single-storey workshop, and has 10 years remaining on its lease, with an option of a further 30-year lease term. Upon completion of the acquisition in 2Q14, the building will be leased back to the current occupant Tellus Marine with annual rental step-ups. We believe the acquisition will be DPU-accretive as the median rent for Senoko Way properties stood at $1.70 psf in 2013. We also noted in Jan-14 that Soilbuild REIT’s aggregate leverage stood at 29.4%, implying ample debt headroom for the acquisition to be fully funded by debt. We like Soilbuild REIT for its consistent performance: exceeding its forecast DPU by 3% and managing borrowings prudently to achieve a lower all-in interest rate of 3.1% versus the forecast rate of 3.3% in its prospectus. Maintain BUY. – AmFraser Securities (17 Mar)

Perennial China Retail Trust
Price – $0.55
Target – $0.50

If St James’ reverse takeover of Perennial Real Estate Holdings (PREH) goes through, PCRT’s shareholders will be offered an option to swap their shares for those of a bigger real estate company with presence in Singapore and China. We believe the rationale of the proposed acquisition and offer is to gain better access to funding. Also, the consolidation of PREH and PCRT’s assets positions the company as a mixed development developer and clears the confusion on whether PCRT should be regarded as a yield play. We view the deal negatively as investors will probably have to compromise on yield; investors will gain access to a portfolio with higher gearing and proportion of assets under development, thus higher risk; and while we believe the $0.70 offer price is fair, the issue price of Perennial Real Estate Holdings at 0.9x NTA is expensive compared to Singapore developers at an average 0.74x P/B. We downgrade our rating to REDUCE and cut our RNAV-based target price by 13% as we increase our discount rate from 20% to 30%. – CIMB Securities (16 Mar)

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

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Cordlife Group  0.450 +0.005 +1.12%   
Business: Co is in the business of cord lining banking and holds the largest market share of private cord blood banks in Singapore, Indonesia and the Philippines.

Insight: Feb-19, 18M18 revenue increased 13% to $12.1.m mai... Read More
Soilbuild Business Space REIT  0.530 +0.005 +0.95%   
Business: S'pore real estate investment trust with a focus on biz space ppties.

Insight: Jan-19, FY18 gross revenue fell marginally by 1.2%... Read More

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