OSK-DMG estimates S$23.3 m earnings boost from Lian Beng's Prudential Tower buy Analysts: Sarah Wong & Terence Wong, CFA  Ong Pang Aik, executive chairman of Lian Beng Group.NextInsight file photoLian Beng, through its 32%-owned associated company, Epic Land Pte Ltd, has entered into an agreement to purchase 92.8% of the aggregate strate area of Prudential Tower from Keppel REIT for SGD512m. We view this opportunistic acquisition favourably, as the sale of Prudential Tower’s strata-titled units could offer Lian Beng earnings boost of c.SGD23.3m, or recurrent rental income of SGD5.1m annually. As the acquisition is expected to be completed in Sept 2014, there should be no impact on FY14 earnings estimates. Once the acquisition goes through, Lian Beng could potentially recognise SGD23.3m over FY15 and FY16, which we will factor in upon actual completion of the acquisition.
We continue to favour Lian Beng for its strong bread-and-butter construction business and growing stream of diversified recurrent earnings. Maintain BUY and SGD1.17 TP. |
OSK-DMG values HanKore at 16.1 cents, assumes CEI merger
Analyst: Sarah Wong
HanKore’s 9MFY14 core operational profit came in at CNY88.0m. One-off non-cash fair value loss came up to CNY130m, with no impact on cashflow.
CEI merger remains the key game-changing catalyst for HanKore, with CEI bringing to the table: i) significantly lower financing costs, thereby allowing WWT project IRRs to improve significantly and raising profitability; and
ii) providing cheaper access to funds to acquire more WWT capacity to attain goal of 10m tonnes/day design capacity in 3-5 years.
We note that HanKore’s management has expressed strong commitment and focus to consummate the merger.
The exclusivity period for the acquisition of CEI water assets was extended to 31 May 2014 due to the complexity of the deal, where we expect to get an update on the colour of the deal.
A merger with CEI remains the key game-changing catalyst for HanKore. Photo: annual report
We continue to value HanKore at 25x FY15F P/E, assuming the CEI merger materialises, which we believe is likely, considering the strong incentives from both parties and the complementary nature of the union.
In the case that it does not materialize, we think HanKore is worth 15x FY14F P/E deriving a fair value of SGD0.097.
We think that current valuation has already priced in a no-deal scenario and that provides a margin of safety for an entry position. Maintain BUY with TP SGD0.161.
CEI merger remains the key game-changing catalyst for HanKore, with CEI bringing to the table: i) significantly lower financing costs, thereby allowing WWT project IRRs to improve significantly and raising profitability; and
ii) providing cheaper access to funds to acquire more WWT capacity to attain goal of 10m tonnes/day design capacity in 3-5 years.
We note that HanKore’s management has expressed strong commitment and focus to consummate the merger.
The exclusivity period for the acquisition of CEI water assets was extended to 31 May 2014 due to the complexity of the deal, where we expect to get an update on the colour of the deal.
A merger with CEI remains the key game-changing catalyst for HanKore. Photo: annual reportWe continue to value HanKore at 25x FY15F P/E, assuming the CEI merger materialises, which we believe is likely, considering the strong incentives from both parties and the complementary nature of the union.
In the case that it does not materialize, we think HanKore is worth 15x FY14F P/E deriving a fair value of SGD0.097.
We think that current valuation has already priced in a no-deal scenario and that provides a margin of safety for an entry position. Maintain BUY with TP SGD0.161.
Recent story: HANKORE -- Buy, Target 17 cts; MIDAS -- Buy, Target 64 cents.
