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Accordia Golf Trust – Why You Should Not Miss A Potential Win
Corporate Digest, Featured | 05 September 2014
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By: Peter Ng
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By: Louis Kent Lee
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Listed on the Singapore Exchange (SGX) on 1 August 2014, Accordia Golf Trust (AGT) has become Singapore’s first listed business trust which comprises golf assets in Japan. After its share price declined 20.6 percent at its lowest, we took a look at a common misunderstanding most investors have regarding its gearing level, and uncovered a valuable discovery that wasn’t readily seen. Could it be your chance to own this unique asset which potentially pays out an annual distribution yield of 10 percent?

AGT’s portfolio consists of 89 golf courses located across Japan, with a heavy concentration in regions like Greater Tokyo, Greater Osaka, and Greater Nagoya.

The properties are valued at approximately JPY150.9 billion (approximately $1.9 billion), with majority of these golf courses situated in major cities that are accessible by Japan’s major modes of transport infrastructure and expressways.

Proven Turnaround Strategy Ensures Earnings Visibility

AGT’s sponsor, Accordia Golf relies on a three-step capital recycling strategy. This involves the acquisition of underperforming golf courses in Japan, turning around these assets and subsequently disposing them to AGT.

“Due to the high maintenance expenses required, many golf courses suffered and this is where Accordia Golf’s strength lies in, Accordia Golf has successfully transformed these distressed golf courses by optimising efficiency and eventually restoring their profitability,” shared Yoshihiko Machida, chief executive officer of AGT.

The sponsor takes an average of three to five years to achieve stabilised margins and income streams, before they are deemed matured and disposed into AGT’s portfolio.

This move ensures that the golf courses acquired will be able to provide AGT with a consistent and visible income stream, translating into stable distributions for AGT’s unitholders.

Strong Branding Promotes Customer Retention

Branding plays a vital role in any business and the same applies in the golf business, where Accordia (one of the brands which Accordia Golf operates) can be seen as a prominent name in the golf course arena.

Accordia Golf’s loyalty card programme commands a pool of 4.1 million as at December 2013, compared to the number of golfers in Japan which stood at 8.6 million in 2013, according to a statistic published by the Japan Productivity Center.

The statistic represents a brand recognition rate of 47.7 percent which is by far the highest in comparison to all other golf course operators in Japan.

Machida revealed that 90 percent of its customers are from this loyal cardholder base. This is mainly attributed to Accordia Golf since it is one of the first golf course operators that has created and implemented a loyalty programme.

We believe that the establishment of a successful loyalty programme has not only allowed AGT to book in recurring sales from its existing members but is also a strong pull factor for customer retention.

Macro Factors

We are of the view that there are two main macro catalysts that could potentially increase traffic to AGT’s golf courses.

Firstly, Japan has an ageing population. According to a report by CBRE Group, people above the age of 40 made up 58 percent of the golfers population in Japan, suggesting that golf players who approach retirement age tend to play more golf.

AGT further observed that members above the age of 70 were recorded spending 2.5 times more than members below age 30.

In our opinion, this endorses the potential where revenue can be extracted from the identified demographic group, which should see a correlated increase as more of the Japanese population shifts into the “above 70 years old” category.

Secondly, Japan initiated the restoration of golf as an official Olympics sport in 2016. Coupled with the country’s winning bid to host the 2020 Summer Olympic Games, golf’s prominence in Japan is set to rise.

In addition, the enlarged tourism effect as a result of the Summer Olympic Games, will also be a catalyst to capture higher traffic for recreational activities such as golf. More importantly, these catalysts will provide an upside to AGT’s average utilisation rate which stood at 75.9 percent in FY13.

Above all, AGT who occupies the largest market share among the other golf course operators in terms of the number of golf courses and holes, is likely to benefit the most.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Accordia Golf Trust  0.555 +0.005 +0.91%   
Business: A business trust specialising in investments in golf courses, driving ranges, and golf course related assets in Japan.

Insight: Feb-19, 9M19 operating income fell 2% to JPY41.1b ... Read More

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