OSK-DMG highlights delisting potential of Lee Kim Tah
Analyst: Goh Han Peng
Lee Kim Tah stock price has been creeping up. Chart: Bloomberg A recent spate of privatizations in the property space highlights the latent value in commercial real estate landlords.Pan Pacific Hotels Group was the subject of a privatization move by UOL Group in May at a 9% premium to its last traded price.
This was followed by Guthrie GTS, a diversified company with real estate assets across the retail, residential and commercial sectors, which received a delisting offer from its major shareholders at a 21% premium to the last traded price.
We think the eventual end game for Lee Kim Tah, which has evolved from its roots as a construction company into a property developer-cum-landlord, is a similar privatization offer from the founding Lee family.
After many years of open market purchases, the Lee family today controls over 85% of the company, putting them within a whisker of the 90% shareholding level for delisting.
Privatization angle aside, the stock is undervalued as we believe the value of its 50% stake in Jurong Point and 75% stake in the SIPCOT Information Technology Park township development in Chennai, is not adequately reflected in its books.
The stock trades at 34% to our re-appraised net asset value of S$1.28, and we have a TP of $1.02 based on a 20% discount to RNAV. BUY for the 22% upside potential.
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UOB Kay Hian recommends investment themes for 2H2013
Suntec REIT is on the recommended buy list of UOB KH. Photo: CompanyThe recent pullback in the FSSTI could provide selective opportunities to accumulate, in our view. After the selldown, the market is trading at a PER of 13.5X FY14F, which is at a 17% discount to its long-term mean PER of 16.3X. Our 2H13 strategy would be to buy inexpensive large caps with dividend yield and earnings visibility on price pullbacks.
Themes to consider in 2H13 to benefit from the recent market consolidation include:
a) rotation among high-yield stocks,
b) stocks with region-/sector-specific growth drivers, and
c) quality laggards.
We would also urge investors to switch out of stocks that are trading at stretched valuations, such as IHH, SMRT and Genting SP.
Our key picks for 2H13 in the big-cap space include DBS, CapitaLand, CCT, Suntec REIT, A-REIT, Keppel Corp, StarHub and Bumitama.
Key SELLs include IHH, SMRT and Genting SP.
